Q3 2024 PACCAR Inc Earnings Call

October 22, 2024

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Speaker: Thanks for watching.

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Yes.

Ken Hastings: Good morning and welcome to Paccor's third quarter 2024 earnings conference call. All lines will be in a listen only mode until the question and answer. Today's call is being recorded and if anyone has an objection, they should disconnect at this time.

Operator: Good morning and welcome to PACCAR's Q3 2024 earnings conference call. All lines will be in a listen-only mode until the question and answer session. Today's call is being recorded, and if anyone has an objection, they should disconnect at this time. I would now like to introduce Mr. Ken Hastings, PACCAR's Director of Investor Relations. Mr. Hastings, please go ahead.

Speaker Change: Good morning, and welcome to Taco third quarter 'twenty 'twenty four earnings conference call.

Speaker Change: All lines will be in a listen only mode until the question I don't depression.

Today's call is being recorded and if anyone has an objection. They should disconnect at this time.

Ken Hastings: I would now like to introduce Mr. Ken Hastings, PACCORP Director of Investor Relations.

Speaker Change: I would now like to introduce Mr. Ken Hastings, <unk> director of Investor Relations.

Ken Hastings: Mr. Hastings, please go ahead. Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR's Director of Investor Relations. And joining me this morning are Preston Feitz, Chief Executive Officer, Harrie Schippers, President and Chief Financial Officer, and Bryce Poplosky, Vice President and Controller.

Speaker Change: Hey, Tim Please go ahead.

Ken Hastings: Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR's Director of Investor Relations, and joining me this morning are Preston Feight, Chief Executive Officer, Harry Schippers, President and Chief Financial Officer, and Bryce Poplosky, Vice President and Controller. As with prior conference calls, we ask that any members of the media on the line participate in a listen-only mode. Certain information presented today will be forward-looking and involve risks and uncertainties that may affect expected results. For additional information, please see our SEC filings at the Investor Relations page of PACCAR.com. I would now like to introduce Preston Feight.

Ken Hastings: Good morning, we would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, Patkars director of Investor Relations.

Ken Hastings: And joining me. This morning are Preston Feight, Chief Executive Officer, Harry Skippers, President and Chief Financial Officer, and Brian Poplawski, Vice President and controller.

Ken Hastings: As with prior conference calls, we ask that any members of the media on the line participate in a listen only mode. Certain information presented today will be forward-looking and involve risks and uncertainties that may affect expected results. For additional information, please see our SEC filings at the Investor Relations page of PACCAR.com.

Ken Hastings: As with prior conference calls, we ask that any members of the media on the line participate in a listen only mode.

Certain information presented today will be forward-looking and involve risks and uncertainties that may affect expected results. For additional information, please see our SEC filings at the Investor Relations page of PACCAR.com. I would now like to introduce Preston Feight.

Ken Hastings: Certain information presented today will be forward looking and involve risks and uncertainties that may affect expected results for additional information. Please see our SEC filings at the Investor Relations page of <unk> Dot com.

Preston Feitz: I would now like to introduce Preston Fite.

Ken Hastings: I would now like to introduce Preston Feight. Thanks, Ken Good morning, everyone.

Preston Feitz: Thanks, Ken.

Preston Feight: Thanks, Ken. Good morning, everyone. Harrie, Bryce, Ken, and I will update you on our excellent third-quarter financial results and other business highlights. I'd like to start by thanking PACCAR's wonderful employees who deliver PACCAR's high-quality trucks and transportation solutions to our customers all around the world. PACCAR earned a strong $972 million on revenues of $8.2 billion for an industry-leading after-tax return on revenue of 11.8%. PACCAR Parts' third-quarter revenues increased 5% to $1.66 billion, and pre-tax profits were $407 million. PACCAR Financial earned pre-tax income of $107 million in the third quarter. We estimate this year's US and Canadian Class 8 market to be around 260,000 trucks and next year to be in the range of 250,000 to 280,000 vehicles. The vocational segment, where Peterbilt and Kenworth are the market leaders, is strong and is expected to remain strong with continued infrastructure investments.

Preston Feitz: Good morning, everyone. Harry, Bryce, Ken, and I will update you on our excellent third quarter financial results and other business highlights.

Preston Feight: Harry Bryce, Ken and I will update you on our excellent third quarter financial results and other business highlights.

Preston Feitz: I'd like to start by thanking Paccor's wonderful employees who deliver Paccor's high quality trucks and transportation solutions to our customers all around the world. Paccor earned a strong $972 million on revenues of $8.2 billion for an industry-leading after-tax return on revenue of 11.8%. Paccor Parts third quarter revenues increased 5% to $1.66 billion and pre-tax profits were $407 million. Financial earned pre-tax income of $107 million in the third quarter. We estimate this year's US and Canadian Class 8 market to be around 260,000 trucks and next year to be in the range of 250 to 280,000 vehicles.

Preston Feight: I'd like to start by thanking Packers wonderful employees, who deliver Packers high quality trucks and transportation solutions to our customers all around the world.

Speaker Change: Hi, Carter and a strong $972 million on revenues of $8 2 billion for an industry, leading after tax return on revenue of 11, 8%.

PACCAR Parts' third-quarter revenues increased 5% to $1.66 billion, and pre-tax profits were $407 million. PACCAR Financial earned pre-tax income of $107 million in the third quarter. We estimate this year's US and Canadian Class 8 market to be around 260,000 trucks and next year to be in the range of 250,000 to 280,000 vehicles. The vocational segment, where Peterbilt and Kenworth are the market leaders, is strong and is expected to remain strong with continued infrastructure investments.

Speaker Change: Pat car parts third quarter revenues increased 5% to 166 billion and pre tax profits were $407 million.

Speaker Change: Pack, our financial earned pretax income of $107 million in the third quarter.

Speaker Change: We estimate this year's U S and Canadian class eight market to be around 260000 trucks.

Speaker Change: And next year to be in the range of 250 to 280000 vehicles.

Preston Feitz: The vocational segment, where Peterbilt and Kenworth are the market leaders, is strong and is expected to remain strong with continued infrastructure investment. The less-than-truckload market is performing well, while the truckload segment seems to have stabilized. Peterbilt and Kenworth's combined Class A share has increased from 29.5% to 31.1%. Kenworth & Peterbilt's Dealer Inventory is a healthy 2.9 month. Kenworth and Peterbilt increased their medium-duty market share in the first nine months of this year to 17.2%, compared to 14.5% last year. In Europe, this year's truck industry registrations in the above 16 ton segment are estimated to be around 300,000 vehicles.

Speaker Change: The vocational segment, where peterbilt and kenworth are the market leaders is strong and is expected to remain strong with continued infrastructure investments.

Preston Feight: The less-than-truckload market is performing well, while the truckload segment seems to have stabilized. Peterbilt and Kenworth's combined Class 8 share has increased from 29.5% to 31.1%. Kenworth and Peterbilt's dealer inventory is a healthy 2.9 months. Kenworth and Peterbilt increased their medium-duty market share in the first nine months of this year to 17.2%, compared to 14.5% last year. In Europe, this year's truck industry registrations in the above-16-ton segment are estimated to be around 300,000 vehicles. The 2025 market is expected to be in the range of 270,000 to 300,000 trucks. Last month, at the IAA Truck Show in Germany, DAF introduced its new 2025 lineup of trucks, which improved fuel economy by 3% and used advanced driver assistance systems to enhance safety. In addition, the 2025 vehicles feature PACCAR's connected truck solutions, which bring great value to the customer.

The less-than-truckload market is performing well, while the truckload segment seems to have stabilized. Peterbilt and Kenworth's combined Class 8 share has increased from 29.5% to 31.1%. Kenworth and Peterbilt's dealer inventory is a healthy 2.9 months. Kenworth and Peterbilt increased their medium-duty market share in the first nine months of this year to 17.2%, compared to 14.5% last year. In Europe, this year's truck industry registrations in the above-16-ton segment are estimated to be around 300,000 vehicles.

The less than truckload market is performing well, while the truckload segment seems to have stabilized.

Speaker Change: Peterbilt and Kenworth combined class eight share has increased from 29, 5% to 31, 1%.

Speaker Change: Kenworth and Peterbilt dealer inventory is a healthy two nine months.

Speaker Change: Kenworth and peterbilt increase their medium duty market share in the first nine months of this year to 17, 2% compared to 14, 5% last year.

Speaker Change: In Europe. This year's truck industry registrations in the above 16 tonne segment are estimated to be around 300000 vehicles. The.

The 2025 market is expected to be in the range of 270,000 to 300,000 trucks. Last month, at the IAA Truck Show in Germany, DAF introduced its new 2025 lineup of trucks, which improved fuel economy by 3% and used advanced driver assistance systems to enhance safety. In addition, the 2025 vehicles feature PACCAR's connected truck solutions, which bring great value to the customer.

Preston Feitz: 2025 markets expected to be in the range of 270 to 300,000 trucks.

Speaker Change: For 2025 market is expected to be in the range of 270 to 300000 trucks.

Preston Feitz: Last month at the IAA Truck Show in Germany, DAF introduced its new 2025 lineup of trucks, which improve fuel economy by 3% and use advanced driver assistance systems to enhance safety. In addition, the 2025 vehicles feature Paccor's connected truck solutions, which bring great value to the customer. South American above 16-ton market is projected to be in a range of 110,000 to 120,000 trucks this year and in a similar range next year. Paccor's premium lineup of trucks are performing well for customers in South America, especially in the important Brazilian market.

Speaker Change: Last month at the IAA truck show in Germany, <unk> introduced its new 2025 lineup of trucks, which improved fuel economy by 3% and use advanced driver assistance systems to enhance safety.

Speaker Change: In addition, the 2025 vehicles feature pack cars connected truck solutions, which bring great value to the customer.

Preston Feight: The South American above-16-ton market is projected to be in a range of 110,000 to 120,000 trucks this year and in a similar range next year. PACCAR's premium lineup of trucks are performing well for customers in South America, especially in the important Brazilian market. PACCAR and its dealers are delivering excellent trucks and transportation solutions to our customers, and we are excited about the future. Thank you. Harry will now provide an update on PACCAR Parts, PACCAR Financial Services, and other business highlights. Harry? Thanks, Preston. PACCAR delivered 44,900 trucks during the third quarter. We expect fourth-quarter deliveries to be around 42,000 vehicles. More production days in Europe will be offset by fewer production days due to normal holidays in North America and some supplier-related limitations. PACCAR Parts delivered third-quarter gross margins of 30.1%.

The South American above-16-ton market is projected to be in a range of 110,000 to 120,000 trucks this year and in a similar range next year. PACCAR's premium lineup of trucks are performing well for customers in South America, especially in the important Brazilian market. PACCAR and its dealers are delivering excellent trucks and transportation solutions to our customers, and we are excited about the future. Thank you. Harry will now provide an update on PACCAR Parts, PACCAR Financial Services, and other business highlights. Harry?

Speaker Change: The South American above 16 tonne market is projected to be in a range of 110 to 120000 trucks. This year.

Speaker Change: In a similar range next year.

Speaker Change: Packers premium lineup of trucks are performing well for customers in South America, especially in the important Brazilian market.

Preston Feitz: Paccor and its dealers are delivering excellent trucks and transportation solutions to our customers and we are excited about the future.

Speaker Change: Hi, Karen its dealers are delivering excellent trucks and transportation solutions to our customers and we are excited about the future.

Harrie Schippers: Harrie will now provide an update on Paccor Parts, Paccor Financial Services, and other business highlights.

Speaker Change: Thank you Harry I'll now provide an update on pack, our parts Packer financial services and other business highlights harriss. Thanks Preston.

Harrie Schippers: Thanks, Preston. PACCAR delivered 44,900 trucks during the third quarter. We expect fourth-quarter deliveries to be around 42,000 vehicles. More production days in Europe will be offset by fewer production days due to normal holidays in North America and some supplier-related limitations. PACCAR Parts delivered third-quarter gross margins of 30.1%. Parts' quarterly sales grew by 5% compared to the same period last year and are expected to grow around 4% in the fourth quarter.

Harrie Schippers: Harrie? Thanks, Preston. Ecker delivered 44,900 trucks during the third quarter. We expect fourth quarter deliveries to be around 42,000 vehicles. More production days in Europe will be offset by fewer production days due to normal holidays in North America and some supplier-related limitations. Packer Parts delivered third quarter gross margins of 30.1 percent. Parts quarterly sales grew by 5% compared to the same period last year and are expected to grow around 4% in the fourth quarter. Packer Parts' focus on expanding its customer base and providing a full range of transportation solutions is delivering sales growth in a smaller after-sales market.

Speaker Change: It got delivered 44900 trucks during the third quarter.

Speaker Change: We expect fourth quarter deliveries to be around 42000 vehicles.

Speaker Change: More production days in Europe will be offset by fewer production days due to normal holidays in North America, and some supply limitations.

Speaker Change: Parts delivered third quarter gross margins.

Speaker Change: 31%.

Preston Feight: Parts' quarterly sales grew by 5% compared to the same period last year and are expected to grow around 4% in the fourth quarter. PACCAR Parts' focus on expanding its customer base and providing a full range of transportation solutions is delivering sales growth in a smaller after-sales market. PACCAR Parts just opened a new distribution center in Massbach, Germany. This new distribution center increases the number of dealers and customers benefiting from receiving parts on the same or next day in the important German market. Truck parts and other gross margins were 16.6% in the third quarter. We anticipate fourth-quarter gross margins to be in the range of 15.5% to 16%. PACCAR Financial Services' results in the third quarter benefited from excellent portfolio quality. Pre-tax income was $107 million. The used truck market has normalized in North America while remaining soft in Europe.

Speaker Change: Barnes quarterly sales grew by 5% compared to the same period last year.

Speaker Change: And are expected to grow 4% in the fourth quarter.

PACCAR Parts' focus on expanding its customer base and providing a full range of transportation solutions is delivering sales growth in a smaller after-sales market. PACCAR Parts just opened a new distribution center in Massbach, Germany. This new distribution center increases the number of dealers and customers benefiting from receiving parts on the same or next day in the important German market. Truck parts and other gross margins were 16.6% in the third quarter.

Speaker Change: Pick up points its focus on expanding its customer base and providing a full range of transportation solutions is delivering sales growth and a smaller office sales market.

Harrie Schippers: Becker Parts just opened a new distribution center in Maasbach, Germany. This new distribution center increases the number of dealers and customers benefiting from receiving parts on the same or next day in the important German market. Truck Parts and Autogrowth Margins were 16.6% in the third quarter. We anticipate fourth quarter gross margins to be in the range of 15.5% to 16%. Paccor Financial Services results in the third quarter benefited from excellent portfolio quality. Pre-tax income was $107 million. The U-Strip market has normalized in North America, while remaining soft in Europe. Paccor Financial is a market leader in supporting customers with innovative technologies that provide seamless credit application and loan servicing processes.

Speaker Change: <unk> just opened a new distribution center in <unk>, Germany.

Speaker Change: This new distribution center increases the number of customers benefiting from receiving parts on the same or next day and important German market.

Speaker Change: Truck parts and other gross margins were 16, 6% in the third quarter.

We anticipate fourth-quarter gross margins to be in the range of 15.5% to 16%. PACCAR Financial Services' results in the third quarter benefited from excellent portfolio quality. Pre-tax income was $107 million. The used truck market has normalized in North America while remaining soft in Europe. PACCAR Financial is a market leader in supporting customers with innovative technologies that provide seamless credit application and loan servicing processes.

Speaker Change: We anticipate fourth quarter gross margins to be in the range of 15, 5% to 16%.

Speaker Change: Becker financial services results in the third quarter benefited from excellent portfolio quality.

Speaker Change: Pretax income was $107 million.

Speaker Change: The us stroke market has normalized in North America, while remaining soft in Europe.

Preston Feight: PACCAR Financial is a market leader in supporting customers with innovative technologies that provide seamless credit application and loan servicing processes. PACCAR's net income of $3.3 billion in the first nine months of this year generated a strong $3.2 billion operating cash flow. PACCAR's return on invested capital was an excellent 25% in the first nine months of this year. This year's capital expenditures are projected to be between $760 and 800 million, and research and development expenses will be $450 to 470 million. Next year, we estimate the company will invest $700 to 800 million in capital projects and $480 to 530 million in research and development projects. PACCAR continues to expand manufacturing capacity at our factories in Europe, the United States, Mexico, Brazil, and Australia. These investments are supporting PACCAR's growth as well as our customers' success.

Speaker Change: Becker financial as a market leader in supporting customers with innovative technologies.

Speaker Change: Seamless credit application and loan servicing processes.

PACCAR's net income of $3.3 billion in the first nine months of this year generated a strong $3.2 billion operating cash flow. PACCAR's return on invested capital was an excellent 25% in the first nine months of this year. This year's capital expenditures are projected to be between $760 and 800 million, and research and development expenses will be $450 to 470 million. Next year, we estimate the company will invest $700 to 800 million in capital projects and $480 to 530 million in research and development projects.

Harrie Schippers: Paccor's net income of $3.3 billion in the first nine months of this year generated a strong $3.2 billion operating cash flow. Paccor's return on invested capital was an excellent 25% in the first nine months of this year. This year's capital expenditures are projected to be between $760 and $800 million. and Research and Development Expenses will be $450 to $470 million. Next year, we estimate the company will invest $700-800 million in capital projects and $480-530 million in research and development projects. Paccor continues to expand manufacturing capacity at our factories in Europe, United States, Mexico, Brazil, and Australia.

Net income of $3 3 billion in the first nine months of this year generated a strong $3 2 billion operating cash flow.

Return on invested capital was an excellent 25% in the first nine months of this year.

Speaker Change: This year's capital expenditures are projected to be between 760 and $800 million.

Speaker Change: Research and development expenses will be $450 million to $470 million.

Next year, we estimate the company will invest $7 million to $800 million in capital projects.

Speaker Change: At 482 $530 million, new T shirts and development projects.

PACCAR continues to expand manufacturing capacity at our factories in Europe, the United States, Mexico, Brazil, and Australia. These investments are supporting PACCAR's growth as well as our customers' success. PACCAR's investments in its premium truck lineup, efficient manufacturing capacity, best-in-class parts and financial services businesses, and the continued development of advanced technologies position the company for industry-leading performance in all phases of the business cycle. Thank you. We'd be pleased to answer your questions.

Speaker Change: Becker continues to expand manufacturing capacity at our factories in Europe, United States, Mexico, Brazil, and Australia.

Harrie Schippers: These investments are supporting Packard's growth, as well as our customers success.

These investments are supporting <unk> growth as well as our customers' success.

Harrie Schippers: Packers investments in its premium truck lineup, efficient manufacturing capacity, best in class parts and financial services, businesses, and the continued development of advanced technologies, position the company for industry leading performance in all phases of the business cycle.

Preston Feight: PACCAR's investments in its premium truck lineup, efficient manufacturing capacity, best-in-class parts and financial services businesses, and the continued development of advanced technologies position the company for industry-leading performance in all phases of the business cycle. Thank you. We'd be pleased to answer your questions.

Speaker Change: But of course investments in its premium truck lineup.

Speaker Change: Patient manufacturing capacity best in class parts and financial services businesses and the continued development of advanced technologies positioned the company for industry leading performance.

Speaker Change: All phases of the business cycle.

Speaker: Thank you. We'd be pleased to answer your questions.

Speaker Change: Thank you we'd be pleased to answer your questions.

Operator: Thank you. If you would like to ask a question, please do so now by pressing Start, followed by the number one on your telephone keypad. If you change your mind and would like to be removed from the queue, please press Start and then Two. When preparing to ask your question, please ensure that your microphone is unmuted locally. Our first question comes from the line of Stephen Volkmann with Jefferies. Stephen, please go ahead.

Speaker: Thank you. If you would like to ask a question, please do so now by pressing start followed by the number one on your telephone.

Speaker Change: Thank you. Thank you.

Speaker Change: Tim Casey for now my question.

Speaker Change: Number one on your commentary.

Speaker: If you change your mind and would like to be removed from the queue, please press star and then When preparing to ask your question, please be sure that your microphone is unmuted.

Speaker Change: Thank you change your mind I would like to hear maybe for Nick.

Speaker Change: Please go ahead.

Speaker Change: And then.

Speaker Change: I wanted to thank you all for your question. Please ensure that your Mark Mcclain.

Speaker Change: Okay.

Stephen Volkman: Our first question comes from the line of Stephen Volkman with.

Speaker Change: Our first question comes from the line of Stephen Volkmann with Jefferies.

Speaker Change: Please go ahead.

Stephen Volkman: Thank you so much. Good morning. And good afternoon.

Stephen Volkmann: Thank you so much. Good morning and good afternoon. I'm curious if we can talk a little bit about what you're seeing on the pricing side. I know we need to normally wait for the queue to get a sense of that, but if you can give us a quick preview of what we're seeing in pricing and kind of how you're expecting that to flow through in Q4 as well.

Speaker Change: Thank you so much good morning.

Preston Feitz: I'm curious, if we can talk a little bit about what you're seeing on the pricing side. I know we need to normally wait for the queue to get a sense of that. But if you can give us a quick preview of what we're seeing in pricing and kind of how you're expecting that to flow through in the fourth quarter as well.

Speaker Change: And good afternoon.

Stephen Volkmann: I'm curious if we can talk a little bit about what youre seeing on the pricing side I know, we need to normally wait for the queue to get a sense of that but if you can give us a quick preview.

Stephen Volkmann: What we're seeing in pricing and kind of how you're expecting that to flow through in the fourth quarter as well.

Preston Feitz: Sure, if you think about price costs, it's kind of price was flat in Q3, and costs were up 3%. So when I think about that from the truck side, if you think about how we look forward at that, we think that the vocational market is going to remain strong. We think the lesson truckload market is doing really well as an addition.

Preston Feight: Sure. If you think about price cost, it's kind of price was flat in Q3 and costs were up 3%. So when I think about that on the truck side, if you think about how we look forward at that, we think that the Latin markets can remain strong. We think the less-than-truckload market's doing really well in addition. And then the truckload sector still seems to be feeling its pressure, but it does seem to have stabilized. And so we're kind of starting to see signs that maybe that tension will release over the coming months and next year, which could be good for us in terms of price versus cost as we look into next year.

Speaker Change: Sure. If you think about price cost its kind of price was flat in Q3 and costs were up 3%.

Speaker Change: So when I think about that is on the truck side. If you think about how we look forward at that we think that the location market is going to remain strong we think the lesson truckload market is doing really well as an addition.

Preston Feitz: And then the truckload sector still seems to be feeling its pressure. But it does seem to have stabilized. And so we're kind of starting to see signs that maybe that tension will release over the coming months and next year, which could be good for us in terms of price versus cost as we look into next year.

Speaker Change: And then the truckload sector is still seems to be feeling its pressure.

Speaker Change: But it does seem to have stabilized and so we're kind of starting to see signs that maybe the tension will release over the coming months and next year, which could be good for us in terms of price versus cost as we look into <unk>.

Speaker Change: Next year.

Preston Feitz: Okay, good. Maybe that starts to answer my follow up, which is that I'm curious, you know, overall, you're sort of flattish globally with your market forecast for next year, maybe you'll gain a little bit of market share like you usually do.

Stephen Volkmann: Okay. Good. Maybe that starts to answer my follow-up, which is that I'm curious. Overall, you're sort of flattish globally with your market forecast for next year. Maybe you'll gain a little bit of market share like you usually do. But that fourth-quarter run rate of 15.5% to 16.7% gross margin, is that a good sort of base to think about for 2025, or is there something that could move that one way or the other? Thanks.

Speaker Change: Okay. Good maybe that starts to answer my follow up which is that I am curious overall year sort of flattish globally with your market forecast for next year, maybe you will gain a little bit of market share like you usually do.

Preston Feitz: But that fourth quarter run rate of 15.5 to 16 point percent gross margin, is that a good sort of base to think about for 2025? Or is there something that could move that one way or the other? Thanks. You know, I think if you go and look at what's been going on this year, right, the year started exceptionally strong in all sectors. And I think maybe the truckload cares about a tougher road to hoe for a little while here.

Speaker Change: But that fourth quarter run rate of 15, 5% to 16, 20% gross margin is that a good sort of base to think about for 2025 or is there something that could move that one way or the other.

Preston Feight: I think if you go and look at what's been going on this year, right, the year started exceptionally strong in all sectors, and I think maybe the truckload has a tougher row to hoe for a little while here. Maybe what you'd expect to see in 2025 is a mirror image of that, where the year starts a little bit like it's finishing and then accelerates, I think, from there. Timing exactly, I don't know that, but it does feel like that's where we're starting to see the stabilization for the truckload sector, just significant. So we would expect to see some growth over the coming year.

Speaker Change: I think if you go and look at what's been going on this year right that youre starting to exceptionally strong in all sectors and I think maybe this the truckload carriers have had a tougher road to hoe for a little while here, maybe what you would expect to see in 2025 is a mirror image of that where the year starts a little bit like it's finishing and then accelerates I think from there timing exactly.

Preston Feitz: Maybe what you'd expect to see in 2025 is a mirror image of that where the year starts a little bit like it's finishing and then accelerates, I think, from there. Timing exactly, I don't know that. But it does feel like that's where we're starting to see the stabilization for the truckload sector, just significant. And so we would expect to see some growth over the coming year.

I don't know that but it does feel like that's where we're starting to see the stabilization for the truckload sector, just significant and so we would expect to see some growth over the coming year.

Stephen Volkman: Super. Thank you. I'll pass it on.

Stephen Volkmann: Super. Thank you. I'll pass it on.

Speaker Change: Super Thank you I'll pass it on.

Preston Feight: All right.

Speaker: All right.

Speaker Change: Alright.

Rob Wertheimer: Our next question comes from the line of Rob Wertheimer with Melio 3.

Operator: Our next question comes from the line of Rob Wertheimer with Melius Research. Please go ahead.

Speaker Change: Our next question comes from the line of Rob <unk> with.

<unk>.

Speaker: Please subscribe.

Speaker Change: Please go ahead hi.

Rob Wertheimer: Hi, thanks, and good morning, guys. So I guess just to follow up on that question, you look at gross margin still at very healthy levels, really historically, but down sequentially, price was kind of flat, you said year over year, and costs creep up a little bit. Is there anything that really should otherwise be called out in the sequential move in gross margin? Thank I don't think there's anything different that I would call out for that. I think, you know, the thing that's been really good for us is the product introductions we've done over the past few years have I mean, it's just stunning how great the trucks are right now.

Rob Wertheimer: Hi. Thanks.

Speaker Change: Hi.

Preston Feight: Hey, Rob. Morning, guys.

Preston Feight: Hey, Rob.

Rob Wertheimer: Morning, guys. So I guess just to follow up on that question, you look at gross margins still at very healthy levels, really, historically, but down sequentially. Price was kind of flat. You said year over year and costs creep up a little bit. Is there anything that really should otherwise be called out in the sequential move in gross margin? Thank you.

Hey, good morning, guys.

Rob Wertheimer: Hi.

Preston Feight: So I guess just to follow up on that question, you look at gross margins still at very healthy levels, really, historically, but down sequentially. Price was kind of flat. You said year over year and costs creep up a little bit. Is there anything that really should otherwise be called out in the sequential move in gross margin? Thank you.

Speaker Change: So I guess just to follow up on that question. If you look at gross margin still at very healthy levels really historically, but down sequentially price was kind of flat you said year over year and cost creep up a little bit is there anything that really should otherwise be called out in the sequential move in gross margin. Thank you.

Rob Wertheimer: I don't think there's anything different that I would call out for that. I think the thing that's been really good for us is the product introductions we've done over the past few years have, I mean, it's just stunning how great the trucks are right now. The fuel economy is outstanding. The reliability is outstanding. Maybe customer desire for the trucks is very high as well. So I think that what we'll see is people's desire to have those trucks as the market opens up.

Preston Feight: I don't think there's anything different that I would call out for that. I think the thing that's been really good for us is the product introductions we've done over the past few years have, I mean, it's just stunning how great the trucks are right now. The fuel economy is outstanding. The reliability is outstanding. Maybe customer desire for the trucks is very high as well. So I think that what we'll see is people's desire to have those trucks as the market opens up.

I don't think there's anything different that I would call out for that I think the thing that's been really good for us as the product introductions, we've done over the past few years.

Speaker Change: Okay.

Just stunning how great the trucks out right now the fuel economy is outstanding liabilities outstanding maybe customer desire for the trucks is very high as well. So I think what we'll see is people's desire to have those trucks as the market opens up.

Preston Feitz: The fuel economy is outstanding, the reliability is outstanding. The customer desire for the trucks is very high as well. So I think that what we'll see is people's desire to have those trucks as the market opens up.

Preston Feitz: All right, perfect. And then I've asked you this before, and I'm not sure you You'll give me a different answer now. But your differentiation is pretty good and vocational. I mean, it's a product that has a lot more has variability to it, let's say, and you guys are real leaders there. Is that at all a margin tailwind for you into next year? Yeah, that's a very good point, Rob. And yes, it is. I would say that's a positive statement to make. I think one of the things that we look at right now is our inventory is in very good shape, as we mentioned.

Preston Feight: All right. Perfect. And then I've asked you this before, and I'm not sure you'll give me a different answer now, but your differentiation is pretty good in vocational. I mean, it's a product that has a lot more, it has variability to it, let's say, and you guys are real leaders there. Is that at all a margin tailwind for you into next year?

Rob Wertheimer: All right. Perfect. And then I've asked you this before, and I'm not sure you'll give me a different answer now, but your differentiation is pretty good in vocational. I mean, it's a product that has a lot more, it has variability to it, let's say, and you guys are real leaders there. Is that at all a margin tailwind for you into next year?

Speaker Change: Alright, perfect and then I've asked you this before I'm not sure.

Speaker Change: Give me a different answer now, but youre differentiation is pretty good and vocational.

Speaker Change: Product that has a lot more has variability to it let's say and you guys are real leaders. There is that at all a margin tailwind for you into next year.

Rob Wertheimer: Yeah. It's a very good point, Rob, and yes, it is. I would say that's a positive statement to make. I think one of the things that we look at right now is our inventory is in very good shape, as we mentioned. And over half of our inventory is vocational trucks that are at bodybuilders right now. So we feel well-positioned overall with inventory, and then we know that our vocational inventory is strong, and we feel like that is good for our business.

Preston Feight: Yeah. It's a very good point, Rob, and yes, it is. I would say that's a positive statement to make. I think one of the things that we look at right now is our inventory is in very good shape, as we mentioned. And over half of our inventory is vocational trucks that are at bodybuilders right now. So we feel well-positioned overall with inventory, and then we know that our vocational inventory is strong, and we feel like that is good for our business.

Speaker Change: Yes, it's a very good point, Rob and yes. It is I would say that's a positive statement to make I think one of the things that we look at right. Now is our inventory is in very good shape as we mentioned.

Preston Feitz: And over half of our inventory is vocational trucks that are at bodybuilders right now. So we feel well positioned overall with inventory. And then we know that our vocational inventory strong, we feel like that is good for our business. And then vocational can be up next year, and I'll stop there.

Speaker Change: And over half of our inventories vocational trucks that are at body builders right now so we feel well positioned overall with inventory and then we know that our vocational inventory strong we feel like that is good for our business.

Preston Feight: Vocational can be up next year? I'll stop there. I apologize. Thank you.

Rob Wertheimer: Vocational can be up next year? I'll stop there. I apologize. Thank you.

Speaker Change: And then a vocational can be up next year and I'll stop there I apologize. Thank you.

Preston Feitz: I apologize. I think vocation will continue to run strong next year.

Rob Wertheimer: I think vocational will continue to run strong next year.

Preston Feight: I think vocational will continue to run strong next year.

Speaker Change: I think location will continue to run strong next year.

Speaker Change: Okay.

Preston Feight: Thank you.

Rob Wertheimer: Thank you.

Rob Wertheimer: Thank you. You bet.

Speaker Change: Thank you.

Rob Wertheimer: You bet.

Preston Feight: You bet.

Speaker Change: You bet.

Steven Fisher: Our next question comes from the line of Steven Fisher with you. Thanks. Good morning. You mentioned that your inventory is what you'd characterize as healthy at 2.9 months. I guess, can you talk about where that 2.9 months is relative to your ideal targets for this point in the cycle? Do you think there's sort of inventory reductions that you have to make? And just curious, kind of what you're seeing from competitors in that perspective? Are they needing to take inventory out? And is that putting some price pressure into the market?

Operator: Our next question comes from the line of Steven Fisher with UBS. Steven, please go ahead.

Speaker Change: Our next question comes from the line of Steven Fisher with UBS.

Speaker Change: Please go ahead.

Stephen Volkmann: Thanks. Good morning. You mentioned that your inventory is what you characterize as healthy at 2.9 months. I guess, can you talk about where that 2.9 months is relative to your ideal targets for this point in the cycle? Do you think there's sort of inventory reductions that you have to make? And just curious kind of what you're seeing from competitors in that perspective, and are they needing to take inventory out, and is that putting some price pressure into the market?

Steven Fisher: Thanks. Good morning. You mentioned that your inventory is what you characterize as healthy at 2.9 months. I guess, can you talk about where that 2.9 months is relative to your ideal targets for this point in the cycle? Do you think there's sort of inventory reductions that you have to make? And just curious kind of what you're seeing from competitors in that perspective, and are they needing to take inventory out, and is that putting some price pressure into the market?

Thanks, Good morning.

Steven Fisher: You mentioned that your inventory is what you'd characterize as healthy at $2 nine months I guess can you talk about where that to nine months is relative to your ideal targets for this point in the cycle do you think there's sort of inventory reductions that you have to make.

Speaker Change: Just curious kind of what youre seeing from <unk>.

Speaker Change: Competitors in that perspective and are they.

Speaker Change: Needing to take inventory out and is that putting some price pressure into the market.

Preston Feitz: Well, I'll let them talk about their inventory positions. But for our inventory position, we feel very good at 2.9 months. That's a very healthy level for us, especially as I mentioned, to Rob, the fact that our vocational inventory takes up a chunk of that. So we feel quite comfortable with our inventory levels and our build rates being well positioned. And it's even come down a little bit during the quarter. At the end of June, we were at 3.3 months, and currently we're at 2.9 months. Okay.

Rob Wertheimer: Well, I'll let them talk about their inventory positions, but for our inventory position, we feel very good at 2.9 months. That's a very healthy level for us, especially, as I mentioned to Rob, the fact that our vocational inventory takes up a chunk of that. So we feel quite comfortable with our inventory levels and our build rates being well-positioned.

Harrie Schippers: Well, I'll let them talk about their inventory positions, but for our inventory position, we feel very good at 2.9 months. That's a very healthy level for us, especially, as I mentioned to Rob, the fact that our vocational inventory takes up a chunk of that. So we feel quite comfortable with our inventory levels and our build rates being well-positioned.

Speaker Change: Well I'll, let them talk about their inventory positions, but for our inventory position, we feel very good at two nine months, that's a very healthy level for us, especially as I mentioned.

Speaker Change: To Rob the fact that our vocational inventory it takes up a chunk of that so we feel quite comfortable with our inventory levels in our build rates being well positioned.

Preston Feight: It's even come down a little bit during the quarter. At the end of June, we were at 3.3 months, and currently, we're at 2.9 months.

Speaker Change: And it's even come down a little bit during the quarter at the end of June we were at $3 three months and currently we're at $2 nine months.

Stephen Volkmann: Okay. And then just you mentioned about some potential re-acceleration in the second half of the year. How are you thinking about the concept of a pre-buy at this point? Is that kind of at all in the thinking, or is it more just sort of the freight market recovering? And if it's a pre-buy, in your thinking, what do you think it will take to kick-start that? Is it just timing and getting closer to the 2026, 2027 timeframe, or does it actually also require some degree of improvement in the freight market?

Steven Fisher: Okay. And then just you mentioned about some potential re-acceleration in the second half of the year. How are you thinking about the concept of a pre-buy at this point? Is that kind of at all in the thinking, or is it more just sort of the freight market recovering? And if it's a pre-buy, in your thinking, what do you think it will take to kick-start that? Is it just timing and getting closer to the 2026, 2027 timeframe, or does it actually also require some degree of improvement in the freight market?

Unknown Attendee: And then just you mentioned about some potential reacceleration in the second half of the year. How are you thinking about the concept of a pre-buy at this point? Is that kind of at all in the thinking or is it more just sort of the freight market recovering? And if it's a pre-buy in your thinking, what do you think it will take to kickstart that? Is it just timing and getting closer to another 26, 27 time frame? Or does it actually also require some degree of improvement in the freight market?

Speaker Change: Okay, and then just you mentioned about some potential reacceleration in the second half of the year. How are you thinking about the concept of a pre buy at this point is that kind of at all on the thinking or is it more just sort of the freight market.

Speaker Change: Covering.

Speaker Change: And if it's a pre buy in your thinking what do you think it will take to kick start that is it just timing and getting closer to that number.

Speaker Change: Another 26, 2007 timeframe or does it actually also require some degree of improvement in the freight market.

Unknown Attendee: Unknown Attendee You know, I think we're going to see some improvement in the freight market. Some of the carriers have started to leave the market, which is something that's been anticipated, I would say. I also think that as you as you think about it, there will be people's trucks have gotten older, and there will be people interested in making sure they're buying enough trucks for the next several years.

Rob Wertheimer: I think we're going to see some improvement in the freight market. Some of the carriers have started to leave the market, which is something that's been anticipated, I would say. I also think that as you think about it, there will be people's trucks have gotten older, and there will be people interested in making sure they're buying enough trucks for the next several years. So that's going to take an effect, I think, as we go through 2025 and add to 2025's growth.

Harrie Schippers: I think we're going to see some improvement in the freight market. Some of the carriers have started to leave the market, which is something that's been anticipated, I would say. I also think that as you think about it, there will be people's trucks have gotten older, and there will be people interested in making sure they're buying enough trucks for the next several years. So that's going to take an effect, I think, as we go through 2025 and add to 2025's growth.

Speaker Change: I think we're going to see some improvement in the freight market. Some of the carriers are starting to leave the market, which is something thats been anticipated I would say I also think that issue as you think about it.

Speaker Change: There will be People's trucks have gotten older and there will be people interested in making sure. They are buying enough trucks for the next several years. So that's going to take that's going to taken effect I think as we go through 2025 and add to 2020 fives growth.

Unknown Attendee: So that's going to take that's going to take an effect I think as we go through 2025 and add to 2025 growth. Okay, thank you very much.

Stephen Volkmann: Okay. Thank you very much.

Steven Fisher: Okay. Thank you very much.

Okay. Thank you very much.

Rob Wertheimer: You bet.

Preston Feight: You bet.

Speaker Change: You bet.

Tami Zakaria: Next question comes from the line of Tami Zakaria with JPMorgan.

Operator: Next question comes from the line of Tami Zakaria with J.P. Morgan. Tami, please go ahead.

Speaker Change: Next question comes from the line of panels.

Speaker Change: <unk> with J P. Morgan.

Tami Zakaria: Unknown Speaker, Unknown Speaker, Hi, thank you so much. So my first question is on Europe. So your outlook for next year, I think it's down 5% at the midpoint for retail sales. And this year, your deliveries are down more than the retail sales expectation. So as we think about next year, Do you plan on delivering to demand or do you expect to underproduce even next year? So how should we think about production in Europe next year? But Tami, yeah, European volumes have been down a little bit more than the market this year. That is really strong in Central and Eastern Europe, where the market has been more affected by the war in Ukraine and the economy is a lot slower there than in some other parts of Europe.

Please go ahead.

Tami Zakaria: Hi. Thank you so much. My first question is on Europe. Your outlook for next year, I think it's down 5% at the midpoint for retail sales. This year, your deliveries are down more than the retail sales expectation. As we think about next year, do you plan on delivering to demand, or do you expect to underproduce even next year? How should we think about production in Europe next year?

Speaker Change: Hi, Thank you so much.

Speaker Change: My first question is on Europe.

Speaker Change: So.

The outlook for next year.

Speaker Change: Down 5% at the midpoint for retail sales.

And this year your deliveries are down more than that.

Speaker Change: Retail sales expectation.

Speaker Change: Think about next year.

Speaker Change: Do you plan on delivering to demand or do you think.

Speaker Change: Back to under produce even next year. So how should we think about production in Europe next year.

Preston Feight: Well, Tami, yeah, European volumes have been down a little bit more than the market this year. DAF is really strong in Central and Eastern Europe, where the market has been more affected by the war in Ukraine, and the economy is a lot slower there than in some other parts of Europe. We expect things to continue at that pace, more or less, as we enter next year, and then we'll see how it progresses during the year.

Harrie Schippers: Well, Tami, yeah, European volumes have been down a little bit more than the market this year. DAF is really strong in Central and Eastern Europe, where the market has been more affected by the war in Ukraine, and the economy is a lot slower there than in some other parts of Europe. We expect things to continue at that pace, more or less, as we enter next year, and then we'll see how it progresses during the year.

Speaker Change: But tommy.

Speaker Change: European volumes have been down a little bit more than the market.

Speaker Change: Year.

Speaker Change: Dove is really strong and central and eastern Europe, where the market has been more affected by the war in Ukraine, and the economy as it looks slower there than in some other parts of Europe.

Speaker Change:

Harrie Schippers: We expect things to continue at that pace, more or less, as we enter next year, and then we'll see how it progresses during the year.

Speaker Change: We expect things to continue it.

Speaker Change: At that pace more or less into as we enter next year and then we'll see how it progresses during the year.

Preston Feitz: Exactly what Harry said. I think I think the other thing is the team in Europe has done a great job on price discipline with the great great new trucks. And so I think those two things combined is we feel pretty well positioned in Europe to that we will build to demand next year. Got it. That is very helpful. And my second question, going back to pricing, I think you said flattish this quarter. Just trying to get a sense of did you open order books for next year? If so, what any reads on what pricing you're seeing for next year?

Rob Wertheimer: Yeah. Exactly what Harry said. I think the other thing is the team in Europe's done a great job on price discipline with the great new trucks. And so I think those two things combined is we feel pretty well-positioned in Europe too, that we will build to demand next year.

Preston Feight: Yeah. Exactly what Harry said. I think the other thing is the team in Europe's done a great job on price discipline with the great new trucks. And so I think those two things combined is we feel pretty well-positioned in Europe too, that we will build to demand next year.

Speaker Change: Exactly what Harry said and I think I think the other thing is the team in Europe has done a great job on price discipline with the great great New trucks.

Speaker Change: So I think those two things combined is we feel pretty well positioned in Europe to that we will build to demand next year.

Tami Zakaria: Got it. That is very helpful. And my second question, going back to pricing, I think you said flattish this quarter. Just trying to get a sense of, did you open order books for next year? If so, any reads on what pricing you're seeing for next year?

Got it that is very helpful and my second question.

Speaker Change: Back to pricing I think you said flattish this quarter.

Speaker Change: Just trying to get a sense of.

Did you open order book for next year.

If so what any reads on what pricing you're seeing for next year.

Preston Feitz: I mean, obviously, it's not so binary as opening and closing the order books, but we did have a significant engagement with a bunch of customers at the recent ATA show. So if you wanted to call that the normal cadence of fleets thinking about their purchases, we had great conversations with them, a lot of enthusiasm for the trucks and kind of an expectation of purchases next year. I think, you know, they're obviously, because of the condition they're all in, it puts some price cost tension into the world right now. But I also feel like that's going to find some relief as we go into 2025.

Rob Wertheimer: Sure, Tami. I mean, obviously, it's not so binary as opening and closing the order books, but we did have a significant engagement with a bunch of customers at the recent ATA show. So if you wanted to call that the normal cadence of fleets thinking about their purchases, we had great conversations with them, a lot of enthusiasm for the trucks, and kind of an expectation of purchases next year. I think they're obviously, because of the condition they're all in, it puts some price cost tension into the world right now, but I also feel like that's going to relieve find some relief as we go into 2025.

Preston Feight: Sure, Tami. I mean, obviously, it's not so binary as opening and closing the order books, but we did have a significant engagement with a bunch of customers at the recent ATA show. So if you wanted to call that the normal cadence of fleets thinking about their purchases, we had great conversations with them, a lot of enthusiasm for the trucks, and kind of an expectation of purchases next year. I think they're obviously, because of the condition they're all in, it puts some price cost tension into the world right now, but I also feel like that's going to relieve find some relief as we go into 2025.

Speaker Change: Sure Jamie I mean, obviously, it's not so buying areas opening and closing the order books, but we did have a significant.

Speaker Change: Engagement with a bunch of customers at the recent <unk> show. So if you wanted to call that.

Speaker Change: The normal cadence of fleet fleets thinking about their purchases, we had great conversations with them a lot of enthusiasm for the trucks and kind of an expectation of purchases next year I think there obviously because of the condition. They are all in it puts some price cost tension into the world right now, but I also feel like Thats going to relief find some relief as we go.

Speaker Change: 2025.

Okay.

Tami Zakaria: Got it.

Tami Zakaria: Got it. Thank you.

Tami Zakaria: Thank you.

Speaker Change: Got it thank you.

Angel Castillo: The next question comes from Angel Castillo with Morgan. Angel, please go ahead.

Operator: The next question comes from Angel Castillo with Morgan Stanley. Angel, please go ahead.

Speaker Change: The next question comes from Andrew <unk> with Morgan Stanley.

Speaker Change: Joe. Please go ahead.

Stephen Volkmann: Hi. Good morning, and thanks for taking my question. Just wanted to go back to the margin conversation, in particular, just understanding the price cost dynamic. So you came in ahead of your expectations on total units for the third quarter, and price seems to be maybe relatively stable, all things considered. But the 16.6% margin implies decrementals on a pre-tax basis of over 50%, which is kind of above the levels that I think of as kind of normal. So was there anything that surprised to the upside or that's leading to kind of higher decrementals than you would have typically expected? And then similar kind of line of question for Q4 in terms of help us kind of bridge the gap. It's not price degradation. What's kind of causing the margin contraction?

Angel Castillo: Hi. Good morning, and thanks for taking my question. Just wanted to go back to the margin conversation, in particular, just understanding the price cost dynamic. So you came in ahead of your expectations on total units for the third quarter, and price seems to be maybe relatively stable, all things considered. But the 16.6% margin implies decrementals on a pre-tax basis of over 50%, which is kind of above the levels that I think of as kind of normal.

So was there anything that surprised to the upside or that's leading to kind of higher decrementals than you would have typically expected? And then similar kind of line of question for Q4 in terms of help us kind of bridge the gap. It's not price degradation. What's kind of causing the margin contraction?

Angel Castillo: Hi, good morning, and thanks for taking my question. Just wanted to go back to the margin conversation, in particular, just understanding the price-cost dynamic. So you came in ahead of your expectations on total units for the third quarter, and price seems to be, you know, maybe relatively stable, all things considered. But the 16.6% margin implies decrementals on a pre-tax basis of over 50%, which is kind of above the levels that I think of as kind of normal. So was there anything that surprised to the upside or, you know, that's leading to kind of higher decrementals than you would have typically expected?

Hi, good morning, and thanks for taking my question just wanted to go back to the margin conversation in particular, just understanding the price cost dynamics.

Speaker Change: You came in ahead of your expectations on total units for the third quarter and price seems to be maybe relatively stable all.

Speaker Change: Thanks considered.

Speaker Change: The 16, 6% margin.

Speaker Change: Empire Decrementals on a pretax basis of over 50% just kind of above the levels that I think of it as kind of normal. So was there anything that surprised to the upside or that's leading to a kind of higher decrementals than you would have typically expected and then similar kind of line of question for <unk> in terms of help us kind of bridge the gap.

Angel Castillo: And then similar kind of line of question for 4Q in terms of, you know, help us kind of bridge the gap, like, it's not price degradation, what's kind of causing the margin contraction?

Speaker Change: Not price degradation, and what's kind of causing the margin.

Speaker Change: Jackson.

Harrie Schippers: I don't know, Harry, do you want to take a swing? Yeah, I think mostly... Any any difference with what we thought a quarter ago would be at the cost side, where we had some some cost elements, there were some supplier issues at that point in time, and some other operating costs. So maybe the cost side was the difference if if you want to point to something. Also lower volumes. But I think, you know, when we're looking at that, we're looking at the totality of this thing, and it feels like these are pretty healthy levels for us, given this point in the cycle and where we see ourselves sitting.

Preston Feight: I don't know. Harry, you want to take a swing?

Speaker Change: I don't know how you want to take a swing I.

Harrie Schippers: Yeah. I think mostly any difference with what we saw the quarter ago would be at the cost side, where we had some cost elements. There were some supplier issues at that point in time and some other operating costs. So maybe the cost side was the difference, if you want to point to something.

Speaker Change: I think mostly.

Speaker Change: Any difference with what we thought a quarter ago, we'd be at the cost side.

Speaker Change: Well, we had some some cost elements there were some supplier issues at that point in time.

Some other operating cost so maybe the cost side, what's the difference if you want to do something.

Preston Feight: Also lower volumes.

Also lower volumes.

Harrie Schippers: Yeah.

Rob Wertheimer: But I think when we're looking at that, we're looking at the totality of this thing, and it feels like these are pretty healthy levels for us given this point in the cycle and where we see ourselves sitting. So it feels pretty good.

Preston Feight: But I think when we're looking at that, we're looking at the totality of this thing, and it feels like these are pretty healthy levels for us given this point in the cycle and where we see ourselves sitting. So it feels pretty good.

Speaker Change: But I think what we're looking at that we are looking at the totality of this thing and it feels like these are pretty healthy levels for us given at this point in the cycle and where we see ourselves sitting so it feels pretty good.

Harrie Schippers: So it feels pretty good.

Angel Castillo: Got it.

Stephen Volkmann: Got it. And then maybe a similar dynamic of just a conversation around the parts profitability. Just what do you see there in terms of that business as you think about as we go into 2025? Just in terms of the profitability, it seemed like it's stepped up nicely in the or kind of remained relatively stable, I guess, for Q2 to Q3. But that was an area that was seeing a little bit of softness as we were talking about it last quarter. So just what's kind of the ongoing trends there?

Angel Castillo: Got it. And then maybe a similar dynamic of just a conversation around the parts profitability. Just what do you see there in terms of that business as you think about as we go into 2025? Just in terms of the profitability, it seemed like it's stepped up nicely in the or kind of remained relatively stable, I guess, for Q2 to Q3. But that was an area that was seeing a little bit of softness as we were talking about it last quarter. So just what's kind of the ongoing trends there?

Speaker Change: Got it and then maybe a similar dynamic or just comp.

Harrie Schippers: And then maybe similar dynamic or just a conversation around the parts profitability, just, you know, what do you see there in terms of that business? If you think about, you know, as we go into 2020 2025, just in terms of profitability, it seemed like it's stepped up nicely in the or kind of remain relatively stable, I guess, for 2Q to 3Q. But that was an area that we're seeing a little bit of softness. We were talking about it last quarter. So just what's kind of the ongoing trends there? The macro thing to think about in the parts market right now is that there's a smaller overall after sales market this year.

Speaker Change: Conversation around the parts profitability just.

Speaker Change: What do you see there in terms of that business that you think about.

As we go into 2020 225, just in terms of a battery related it seems like it's stepped up nicely.

Speaker Change: Okay.

Speaker Change: It kind of remain relatively stable I guess for them to go with <unk>, but that was an area that we're seeing a little bit of softness.

Speaker Change: We're talking about it last quarter, so just what's kind of the ongoing trends there.

Rob Wertheimer: I think the macro thing to think about in the parts market right now is that there's a smaller overall after-sales market this year, and our team's just done a tremendous job of holding excellent margins in that smaller market and seeing growth, in fact, right, as we talked about 5% growth this quarter. So I couldn't be more happy with the work they're doing, the systems they're bringing in, the new PDCs they're opening, and how closely they're working with all the customers to grow that business. So a great story there for the parts team.

Preston Feight: I think the macro thing to think about in the parts market right now is that there's a smaller overall after-sales market this year, and our team's just done a tremendous job of holding excellent margins in that smaller market and seeing growth, in fact, right, as we talked about 5% growth this quarter. So I couldn't be more happy with the work they're doing, the systems they're bringing in, the new PDCs they're opening, and how closely they're working with all the customers to grow that business. So a great story there for the parts team.

Speaker Change: The macro thing to think about and the parts market right. Now is that there is a smaller overall after sales market. This year and our team has just done a tremendous job holding excellent margins in that smaller market and seeing growth in fact, right as we talked about 5% growth.

Harrie Schippers: And our team's just done a tremendous job of holding excellent margins in that smaller market and seeing growth. In fact, right, as we talked about 5% growth this quarter, so I'm going to be more happy with the work they're doing, the systems they're bringing in the new PDCs they're opening, and how, how closely they're working with all the customers to grow that business. So a great story there for for the parts team.

This quarter so.

Speaker Change: Could it be more happy with the work they're doing the systems, they're bringing in the new Pdc's are opening and how how.

Speaker Change: Closely they are working with all the customers to grow that business. So a great story, therefore further part Steve.

Speaker: Thank you.

Stephen Volkmann: Understood. Thank you.

Angel Castillo: Understood. Thank you.

Steve: Thank you.

Rob Wertheimer: You bet.

Preston Feight: You bet.

Okay.

Jamie Cook: The next question comes from Jamie Cook with Tourist Jamie, please go ahead. Hi, good morning. Sorry, just to follow up on the on the parts aftermarket. Can you comment specifically what price cost was like you did for for truck? That would be helpful. And then I guess my other question would be, as you think about truck, you said, you know, price flat cost up 3%. Was there any major, you know, variances sort of by region? And, you know, there's been this thesis that everyone would act more rational this cycle as some of your peers are now, you know, spun off public companies, just any any comment on what how you're seeing behavior sort of, you know, this cycle, you know, versus versus previous cycles.

Operator: The next question comes from Jamie Cook with Truist Securities. Jamie, please go ahead.

Speaker Change: Your next question comes from Jamie Cook with <unk> Securities.

Speaker Change: Jamie Please go ahead.

Ken Hastings: Hi. Good morning. Sorry. Just to follow up on the parts aftermarket, can you comment specifically what price cost was like you did for truck? That would be helpful. And then I guess my other question would be, as you think about truck, you said price flat, cost up 3%. Was there any major variances sort of by region? And there's been this thesis that everyone would act more rational this cycle as some of your peers are now spun off public companies. Just any comment on how you're seeing behavior sort of this cycle versus previous cycles? Thank you.

Jamie Cook: Hi. Good morning. Sorry. Just to follow up on the parts aftermarket, can you comment specifically what price cost was like you did for truck? That would be helpful. And then I guess my other question would be, as you think about truck, you said price flat, cost up 3%. Was there any major variances sort of by region? And there's been this thesis that everyone would act more rational this cycle as some of your peers are now spun off public companies. Just any comment on how you're seeing behavior sort of this cycle versus previous cycles? Thank you.

Jamie Cook: Hi, Good morning, I'm, sorry, just to follow up on the parts aftermarket can.

Jamie Cook: Can you comment specifically what price cost was like you did for truck.

Jamie Cook: That would be helpful. And then I guess my other question would be.

As you think about truck he said price flat cost up 3% was there any major.

Jamie Cook: <unk> sort of by region and there's been this thesis that everyone would act more rationale this cycle of some of your peers are now.

Jamie Cook: Spinoff public companies.

Jamie Cook: A comment on how youre seeing behavior sort of.

Jamie Cook: This cycle versus versus previous cycles. Thank you.

Jamie Cook: Thank you.

Preston Feitz: So starting with parts, Jamie, for parts price was up 3% and cost was at 4% in the quarter. I think if you think about the disciplines of all the other OEMs being public, it's a competitive world, but Paccor has this advantage of having premium products that people really do desire, and so the team has close relationships with the customers and feel like it puts us in a good position. As we noted in the beginning of our commentary, we have best-in-class performance because of the performance of our product for our customers, and we expect that will continue.

Harrie Schippers: So starting with parts, Jamie, for parts, price was up 3% and cost was up 4% in the quarter. And your other question was about.

Speaker Change: So starting with parts Jamie for parts price was up 3% and costs was up 4% in the quarter.

Speaker Change: And you will have the question was about I think if you think about the disciplines of the all.

Rob Wertheimer: Yeah. I think if you think about the disciplines of all the other OEMs being public, listen, it's a competitive world, but PACCAR has this advantage of having premium products that people really do desire. And so the team has close relationships with the customers, and I feel like it puts us in a good position. And as we noted in the beginning of our commentary, we have best-in-class performance because of the performance of our products for our customers, and we expect that will continue.

Preston Feight: Yeah. I think if you think about the disciplines of all the other OEMs being public, listen, it's a competitive world, but PACCAR has this advantage of having premium products that people really do desire. And so the team has close relationships with the customers, and I feel like it puts us in a good position. And as we noted in the beginning of our commentary, we have best-in-class performance because of the performance of our products for our customers, and we expect that will continue.

Speaker Change: All the other way is being being public listen, it's a competitive world, but Pac crisis advantage of having premium products that people really do desire and so the team has close relationships with the customers that feel like it puts us in a good position as we noted at the beginning of our commentary with best in class performance because of the performance of our products for our customers and we expect that will continue.

Preston Feitz: I guess just a follow up question, Preston, understanding your outlook for 2025. And it sounds like things should get better in the back half of the year. As we progress through this cycle, and we get a pre buy ahead of 2027. Is there any reason believe Paccor cannot deliver above average incremental margins like you did prior to this most recent sort of mini downturn, given just the new product introductions, etc? Yeah, no, Jamie, that's a great question. A great way to frame it. I like the way you frame it. I think we can deliver excellent performance in the coming years.

Ken Hastings: I guess just a follow-up question, Preston. Understanding your outlook for 2025, and it sounds like things should get better in the back half of the year. As we progress through the cycle, we get a pre-buy ahead of 2027. Is there any reason to believe PACCAR cannot deliver above-average incremental margins like you did prior to this most recent sort of mini-downturn, given just the new product introductions, etc.?

Jamie Cook: I guess just a follow-up question, Preston. Understanding your outlook for 2025, and it sounds like things should get better in the back half of the year. As we progress through the cycle, we get a pre-buy ahead of 2027. Is there any reason to believe PACCAR cannot deliver above-average incremental margins like you did prior to this most recent sort of mini-downturn, given just the new product introductions, etc.?

Speaker Change: I guess just a follow up question question.

Speaker Change: Understanding your outlook for 2025, and it sounds like things should get better in the back half of the year.

Speaker Change:

Speaker Change: As we progress through the cycle and we get a pre buy ahead of 2027.

Speaker Change: Is there any reason believe pac or cannot.

Speaker Change: Deliver above average incremental margins like you did prior to this most recent sort of mini downturn.

Speaker Change: Given just the new product introductions et cetera.

Rob Wertheimer: Yeah. No, Jamie, that's a great question, a great way to frame it. I like the way you frame it. I think we can deliver excellent performance in the coming years. So I agree with you.

Preston Feight: Yeah. No, Jamie, that's a great question, a great way to frame it. I like the way you frame it. I think we can deliver excellent performance in the coming years. So I agree with you.

Speaker Change: Yes, Jamie it's a great question, a great way to frame that I like the way you frame it and I think we can deliver excellent performance in the coming years.

Preston Feitz: So I agree with you.

Jamie Cook: So I agree with you.

David Raso: Thank you. The next question comes from David Raso with Evercore Eye. Hi. Thanks. Yeah, thank you for the time.

Ken Hastings: Thank you.

Jamie Cook: Thank you.

Rob Wertheimer: You bet.

Preston Feight: You bet.

Jamie Cook: You bet.

Operator: The next question comes from David Raso with Evercore ISI. David, please go ahead.

Speaker Change: The next question comes from David <unk> with Evercore ISI.

Stephen Volkmann: Hi. Thank you. Yeah. Thank you for the time. I have one short-term, one maybe a little bit longer term. On the builds or, sorry, deliveries for the fourth quarter, the 42,000, the geographic composition of that, obviously, historically, Europe will step up. Are we saying even with the extra days in Europe, we won't get a step up in Europe? So that's sort of flattish, and maybe others flattish, and sequentially, US, Canada is the down 11 to get us to 42? I'm just trying to be thoughtful about the geographic mix when I think about the margins.

David Raso: Hi. Thank you. Yeah. Thank you for the time. I have one short-term, one maybe a little bit longer term. On the builds or, sorry, deliveries for the fourth quarter, the 42,000, the geographic composition of that, obviously, historically, Europe will step up. Are we saying even with the extra days in Europe, we won't get a step up in Europe? So that's sort of flattish, and maybe others flattish, and sequentially, US, Canada is the down 11 to get us to 42? I'm just trying to be thoughtful about the geographic mix when I think about the margins.

Speaker Change: Hi, Thank you.

Speaker Change: Yes. Thank you for the time I have one short term one maybe a little bit longer term on the bill so the sorry deliveries for the fourth quarter, the 42000 and the geographic composition of that.

David Raso: I have one short term one, maybe a little On the deliveries for the fourth quarter, the 42,000, the geographic composition of that Obviously, historically, Europe will step up. Are we saying even with the extra days in Europe, we won't get a step up in Europe? So that's sort of flattish, and maybe other is flattish. U.S. Canada is the down 11 to get us the 42. I'm just trying to be thoughtful about the geographic I think, David, you're not off on that. I think that it's relatively flattish, 3Q to 4Q for Europe. And, again, we've gotten our inventory in a very good position there.

Speaker Change: Obviously, historically Europe will step up are we saying even with the extra days in Europe, we won't get a step up in Europe. So that's sort of flattish and maybe other was flattish and sequential U S. Canada is down 11 to get US a 42 I'm just trying to be thoughtful about the geographic mix when I think about the margins.

Rob Wertheimer: Yeah. I think, David, you're not off on that. I think that it's relatively flattish, Q3 to Q4 for Europe. And again, we've gotten our inventory into a very good position there. And then I would expect that we're maybe it's up slightly even, and then we're going to see in the what we're going to see for the US is the normal holiday cadence. And obviously, there was a couple of hurricanes that came through, which did affect some suppliers. And so we're working through that right now with them. And the supply base is doing a great job of sorting that out, and it's just something we got to kind of sort out as a team.

Preston Feight: Yeah. I think, David, you're not off on that. I think that it's relatively flattish, Q3 to Q4 for Europe. And again, we've gotten our inventory into a very good position there. And then I would expect that we're maybe it's up slightly even, and then we're going to see in the what we're going to see for the US is the normal holiday cadence. And obviously, there was a couple of hurricanes that came through, which did affect some suppliers. And so we're working through that right now with them. And the supply base is doing a great job of sorting that out, and it's just something we got to kind of sort out as a team.

Yes, I think David Youre, not youre not off on that I think that is relatively flattish <unk> to <unk> for Europe.

Harrie Schippers: And then I would expect that we're maybe it's up slightly even, and then we're going to see in the we're going to see for the US is the normal holiday cadence. And obviously, you know, there was a couple of hurricanes that came through, which did affect some suppliers. And so we're working through that right now with them. The supply base is doing a great job of sorting that out. And it's just something we got to kind of sort out as a team. Yeah, on a per day basis, Europe is flattish going into the fourth quarter.

Speaker Change: <unk>.

Speaker Change: Again, we've got the inventory in a very good position there and then I would expect that were maybe it's up slightly even and then we're going to see and.

Speaker Change: What we're going to see for the U S is the normal holiday cadence and obviously you know there was a couple of hurricanes that came through it did affect some suppliers and so we're working through that right now with them.

Speaker Change: The base is doing a great job of sorting that out and it's just something we've got to kind of sort out as a team.

Harrie Schippers: Yeah. On a per-day basis, Europe is flattish going into Q4, but the more production days, I think it provides a couple thousand more trucks in Europe compared to Q3 in Q4.

Speaker Change: On a per day basis, Europe is flattish going into the fourth quarter, but the more production days I think it provides.

Preston Feitz: But the more production days, I think it provides A couple thousand more trucks in Europe compared to the third quarter, in the fourth quarter. That's the whole thing. If it's a couple thousand more. whole company down. I'm just trying to figure out what you're talking about. North America, down 20 sequentially. I'm just trying to get a sense of the magnitude. Because I could explain the margin pressure a little bit with Max. Not 20, but there's, what is it, seven or eight fewer working days in the fourth quarter than North America. That's helpful. And then on the issue of the pre-lie, I'm sorry, go ahead, Preston.

Speaker Change: A couple of times with more trucks in Europe compared to the third quarter into fourth quarter.

Stephen Volkmann: Well, that's the whole thing. If it's a couple thousand more to keep the whole company down to 42, I'm just trying to figure out, is North America - sorry, US, Canada - down 20 sequentially? I'm just trying to get a sense of the magnitude. Because that could explain the margin pressure a little bit.

David Raso: Well, that's the whole thing. If it's a couple thousand more to keep the whole company down to 42, I'm just trying to figure out, is North America - sorry, US, Canada - down 20 sequentially? I'm just trying to get a sense of the magnitude. Because that could explain the margin pressure a little bit.

Speaker Change: That's the whole thing if it's a couple of thousand more to keep the whole company down to 42.

Speaker Change: I'm just trying to figure out is is North America.

Speaker Change: Down 20% sequentially I'm, just trying to get a sense of the magnitude does that could explain the margin restaurant <unk> 'twenty.

Harrie Schippers: Not 20, but there's what is it? Seven or eight fewer working days in Q4 in North America.

'twenty because that's what it is at 708 fewer working days in the fourth quarter in North America.

Stephen Volkmann: Okay. That's helpful. And then on the issue of the pre-buy, oh, sorry. Go ahead, Preston.

David Raso: Okay. That's helpful. And then on the issue of the pre-buy, oh, sorry. Go ahead, Preston.

Speaker Change: Okay. That's helpful.

Speaker Change: And then on the issue of the P&I.

Speaker Change: I'm sorry go ahead Preston.

Preston Feitz: No, go ahead.

Rob Wertheimer: No, go ahead.

Preston Feight: No, go ahead.

No go ahead.

Speaker Change: Okay.

Preston Feitz: Well, I was just moving on to the second question I had about the pre-buy. A major engine supplier we hear could be pulling 27. could actually inspire maybe some buying of their engine in 25. So I just want. playing out, which could help 25.

Stephen Volkmann: Well, I was just moving on to the second question I had about the pre-buy. A major engine supplier we hear could be pulling their engine for 2027 earlier, which could actually inspire maybe some buying of their engine in 2025. So I just wanted to see if you'd enlighten us on that at all, if that is maybe what's playing out, which could help 2025. And then second, on the inventory for the vocational, you mentioned the bodybuilders who continue to be a bottleneck. So the inventory sitting out there in vocational does, we'd argue, have a customer. They're just the bottleneck of the bodybuilder to finish off the job. Is there something going on with the bodybuilders that can sort of break that through a little bit?

David Raso: Well, I was just moving on to the second question I had about the pre-buy. A major engine supplier we hear could be pulling their engine for 2027 earlier, which could actually inspire maybe some buying of their engine in 2025. So I just wanted to see if you'd enlighten us on that at all, if that is maybe what's playing out, which could help 2025. And then second, on the inventory for the vocational, you mentioned the bodybuilders who continue to be a bottleneck.

Speaker Change: Well I would just moving onto the second question I had about the pre buy.

Speaker Change: A major engine supplier, we hear it could be pulling their engine for 27 earlier, which could actually inspire maybe some buying their engine in 25. So I just wanted to see if you'd like.

Speaker Change: Enlighten us on that at all if that is maybe what's playing out which could help 25 and then second on the inventory for the vocational you you mentioned, the bodybuilders, who continue to be a bottleneck.

Preston Feitz: And then second on the inventory for the vocational, you mentioned the bodybuilders who continue to be a bottle. So the inventory sitting out there in vocational does, we'd argue, have a customer base. Bottleneck of the Bodybuilder to finish off the job. There's something going on with the bodybuilders, I can sort of break that through a little bit. And if not, is the level of vocational trucks sitting there waiting for a bodybuilder an impediment to you? Yeah, I think that what you've seen is there was a there was this impulse throughout 2024 in the vocational market.

So the inventory sitting out there in vocational does, we'd argue, have a customer. They're just the bottleneck of the bodybuilder to finish off the job. Is there something going on with the bodybuilders that can sort of break that through a little bit?

Speaker Change: So the inventory sitting out there and vocational does lead argue have a customer they're just the bottleneck of the bodybuilder to finish off the job is there something going on with the bodybuilders I can sort of break that through a little bit.

Stephen Volkmann: If not, is the level of vocational trucks sitting there waiting for a bodybuilder an impediment to you being able to grow your vocational business more in 2025?

If not, is the level of vocational trucks sitting there waiting for a bodybuilder an impediment to you being able to grow your vocational business more in 2025?

Speaker Change: And if not is the level of vocational trucks sitting there waiting for a bodybuilder an impediment to you being able to grow your vocational business more than 25.

Rob Wertheimer: Yeah. I think that what you've seen is there was this impulse throughout 2024 in the vocational market, and I think that's maybe stabilized at a high level. So I think people are doing a job, a good job of catching up in what the bodybuilder capacity has been and is. So they're getting that sorted out is what it feels like, David. Obviously, there's some components on vocational trucks that are unique, and some of those are in tight supply right now, which sends some throttle on it. All of that together means that I think 2025 will continue strong in the vocational sector. There's still infrastructure spending. The country's doing well. And so I would expect vocational to remain a strong point for us. And as you well know, right, we have over 40% market share in that sector. So that will be good for PACCAR in 2025.

Preston Feight: Yeah. I think that what you've seen is there was this impulse throughout 2024 in the vocational market, and I think that's maybe stabilized at a high level. So I think people are doing a job, a good job of catching up in what the bodybuilder capacity has been and is. So they're getting that sorted out is what it feels like, David. Obviously, there's some components on vocational trucks that are unique, and some of those are in tight supply right now, which sends some throttle on it.

Speaker Change: Yes, I think that what you've seen is there was there was this impulse throughout 2024 and the vocational market and I think that's maybe stabilized at a high level. So I think people are doing a job a good job of catching up and what the bodybuilder capacity is has been and is so theyre getting that sorted out as what it feels like David obviously there.

Preston Feitz: And I think that's maybe stabilized at a high level. So I think people are doing a job a good job of catching up and what the bodybuilder capacity is, has been and is. So they're getting that sorted out is what it feels like David. Obviously, there's Some components on vocational trucks that are unique, and some of those are in tight supply right now, which sends some throttle on it. All of that together means that I think 2025 will continue strong in the vocational sector. There's still infrastructure spending. The country's doing well. And so I would expect vocational to remain a strong point for us.

Speaker Change: <unk>.

Speaker Change: Some components on vocational trucks that are unique and some of those are in tight supply right now, which sent some throttle on it all of that together means that I think 2025, we will continue strong in the vocational sector, there's still infrastructure spending.

All of that together means that I think 2025 will continue strong in the vocational sector. There's still infrastructure spending. The country's doing well. And so I would expect vocational to remain a strong point for us. And as you well know, right, we have over 40% market share in that sector. So that will be good for PACCAR in 2025. Coming back around to your first question, we have a great relationship with Cummins.

Speaker Change: Countries doing well and so I would expect vocational to remain a strong point for us and as you well know right. We have over 40% market share in that sector. So that will be good for <unk> and 'twenty five.

Preston Feitz: And as you well know, right, we have over 40% market share in that sector. So that will be good for Paccor in 25. And coming back around to your first question, you know, we have a great relationship with Cummins, we build our own engines, we're well positioned for today's emission standards, as well as the upcoming emission standards, and feel like we'll be able to offer our customers the right products for The Upcoming Markets, and don't have any concerns about how that's going to play out.

Rob Wertheimer: Coming back around to your first question, we have a great relationship with Cummins. We build our own engines. We are well-positioned for today's emission standards as well as the upcoming emission standards, and feel like we'll be able to offer our customers the right products for the upcoming markets and don't have any concerns about how that's going to play out.

Speaker Change: And coming back around to your first question.

We have a great relationship with Cummins, we build our own engines, we are well positioned for today's emission standards as well as the upcoming emission standards and feel like we'll be able to offer our customers the right products for them.

We build our own engines. We are well-positioned for today's emission standards as well as the upcoming emission standards, and feel like we'll be able to offer our customers the right products for the upcoming markets and don't have any concerns about how that's going to play out.

Speaker Change: The upcoming markets and don't have any concerns about how that is going to play out.

Stephen Volkmann: Okay. I'll leave it there. Thank you so much.

David Raso: Okay. I'll leave it there. Thank you so much.

Speaker: Okay, I'll leave it there. Thank you so much.

Speaker Change: Okay I'll leave it there. Thank you so much.

Rob Wertheimer: Great.

Preston Feight: Great.

Speaker Change: Great.

Speaker Change: Yeah.

Jerry Revich: Our next question comes from Jerry Revich with Goldman Sachs.

Operator: Our next question comes from Jerry Revich with Goldman Sachs. Please go ahead, Jerry.

Speaker Change: Our next question comes from Jerry Revich with Goldman.

Jerry Revich: Please go ahead. Yes, hi. Good morning. Good afternoon. I'm wondering if you can just talk about on the cost side, you know, your teams have been sprinting really hard to get trucks out the door when supply was tight. And I'm wondering, based on the cost materials that are now flowing through the factories, when do you think we could see per truck costs actually coming down? And you know, if the current steel price cost curve holds in particular, do you think we could be looking at per truck costs? Tailwind at some point in early 25 on a year.

Speaker Change: Please go ahead Gary.

Tami Zakaria: Yes. Hi. Good morning. Good afternoon, everyone. I'm wondering if you could just talk about, on the cost side, your teams have been sprinting really hard to get trucks out the door when supply was tight. And I'm wondering, based on the cost of materials that are now flowing through the factories, when do you think we could see per-truck costs actually coming down? And if the current steel price cost curve holds in particular, do you think we could be looking at per-truck costs potentially tailwind at some point in early 2025 on a year-over-year basis?

Jerry Revich: Yes. Hi. Good morning. Good afternoon, everyone. I'm wondering if you could just talk about, on the cost side, your teams have been sprinting really hard to get trucks out the door when supply was tight. And I'm wondering, based on the cost of materials that are now flowing through the factories, when do you think we could see per-truck costs actually coming down? And if the current steel price cost curve holds in particular, do you think we could be looking at per-truck costs potentially tailwind at some point in early 2025 on a year-over-year basis?

Jerry Revich: Yes, hi, good morning, good afternoon, everyone.

Jerry Revich: Yes, I'm wondering if you could just talk about.

Jerry Revich: Hi, I'm wondering if you just talk about on the cost side.

Jerry Revich: Our teams have been sprinting really hard to get trucks out the door when supply was tight and I'm wondering based on the cost of materials that are now flowing through the factories. When do you think we could see for truck costs actually coming down and if the current steel price cost curve holds in particular.

Jerry Revich: Do you think we could be looking at for truck cost potentially a tailwind at some point in early <unk> 25 on a year over year basis.

Preston Feitz: You know, Jerry, that's a possibility. I think there's a little bit of labor that factors into here, too, that you've looked at on a year-over-year basis, which is something that's been incurred by the industry as a whole, including our supply base, much written about. So I think we'll just have to watch how those two things interplay with each other in the coming, you know, six months.

Speaker Change: Yes, Jerry.

Rob Wertheimer: Jerry, that's a possibility. I think there's a little bit of labor that factors into here too that you've looked at on a year-over-year basis, which is something that's been incurred by the industry as a whole, including our supply base, much written about. So I think we'll just have to watch how those two things interplay with each other in the coming six months.

Preston Feight: Jerry, that's a possibility. I think there's a little bit of labor that factors into here too that you've looked at on a year-over-year basis, which is something that's been incurred by the industry as a whole, including our supply base, much written about. So I think we'll just have to watch how those two things interplay with each other in the coming six months.

Speaker Change: It's a possibility I think theres, a little bit of labor that factors into here too that you've looked at on a year over year basis, which is something thats been incurred by the industry as a whole, including our supply base much written about so I think we'll just have to watch how those two things interplay with each other in the coming six months.

Tami Zakaria: Yeah. And then in terms of the mix of what you folks have in backlog, can you talk about that? You mentioned earlier in the conversation the margin step down has been driven in large part by a mix of product. How does the mix of what you folks have left in backlog look compared to what we shipped this quarter?

Jerry Revich: Yeah. And then in terms of the mix of what you folks have in backlog, can you talk about that? You mentioned earlier in the conversation the margin step down has been driven in large part by a mix of product. How does the mix of what you folks have left in backlog look compared to what we shipped this quarter?

Preston Feitz: So, and then in terms of the mix of what you folks have in backlog, can you talk about that? You mentioned earlier in the conversation, the margin step down has been driven large by mix of product. How does the mix of what you folks have left in backlog look compared to what we ship? Yeah, we still see the same ratios of really strong truck versus tractor production, truck production still running around 50%. So that's above a historical number, but very, very good numbers for us. And you folks have improved your truck profitability significantly cycle over cycle.

Speaker Change: So and then in terms of.

Speaker Change: The mix of what you folks have in backlog can you talk about that you mentioned earlier in the conversation.

Speaker Change: Margin step down has been driven in large part.

Speaker Change: Mix of products, how does that mix of what you folks have left in backlog look compared to what we ship.

Speaker Change: This quarter.

Rob Wertheimer: Yeah. We still see the same ratios of really strong truck versus tractor production. Truck production is still running around 50%. So that's above a historical number, but very good numbers for us.

Preston Feight: Yeah. We still see the same ratios of really strong truck versus tractor production. Truck production is still running around 50%. So that's above a historical number, but very good numbers for us.

Yes, we still see the same ratios have really strong truck versus tractor production truck production still running around 50%. So thats above the historical number but very very good numbers for us.

Tami Zakaria: You folks have improved your truck profitability significantly cycle over cycle. In the past, we've seen margins peak to trough. Truck gross margins range from 400 to 1,000 basis points peak to trough. How do you think the higher margin profile that you folks have now will translate into truck cyclicality going forward? What's the impact on fixed versus variable cost versus history? Any comments that you care to make on that question?

Speaker Change: Okay.

Jerry Revich: You folks have improved your truck profitability significantly cycle over cycle. In the past, we've seen margins peak to trough. Truck gross margins range from 400 to 1,000 basis points peak to trough. How do you think the higher margin profile that you folks have now will translate into truck cyclicality going forward? What's the impact on fixed versus variable cost versus history? Any comments that you care to make on that question?

Speaker Change: You folks have improved your truck profitability significantly cycle over cycle.

Preston Feitz: You know, in the past, we've seen margins peak to trough, truck gross margins range from 400 to 1000 basis point peak to trough. How do you think the higher margin profile that you folks have now will translate into truck cyclicality going forward? What's the impact on fixed versus variable cost versus history? Any comments that you care to make on that? Sure, Jerry, it's a great observation on your part. I think that what we see is the company's performing at a structurally stronger level. I think that's because of the great investments and the efforts of the team to provide excellent products for our customers.

In the past, we've seen margins peak to trough truck gross margins.

Speaker Change: From 400 to 1000 basis points peak to trough.

Speaker Change: How do you think the higher margin profile that you folks have now will translate into <unk>.

Speaker Change: Truck cyclicality going forward, what's the impact on fixed versus variable cost versus history.

Any comments that you care to make on that question.

Rob Wertheimer: Sure, Jerry. I think it's a great observation on your part. I think that what we see is the company's performing at a structurally stronger level. I think that's because of the great investments and the efforts of the team to provide excellent products for our customers. I mean, they really are helping our customers make money, and they are desired by the drivers. So that's a nice position to be in. I think PACCAR's lean culture and operating disciplines are healthy and good for the company, and good for our operating performance, good for our customers in terms of us being a lean operating company, and good for our shareholders. So you're right in making the observation, and we think that that observation will hold true.

Preston Feight: Sure, Jerry. I think it's a great observation on your part. I think that what we see is the company's performing at a structurally stronger level. I think that's because of the great investments and the efforts of the team to provide excellent products for our customers. I mean, they really are helping our customers make money, and they are desired by the drivers. So that's a nice position to be in.

Speaker Change: Sure Gerry I think it's a great observation on your part I think that what we see as the company is performing at a structurally stronger level I think thats because of the great investments and the efforts of the team to provide excellent products for our customers I mean, they really are helping our customers make money and they are desired by the drivers so thats good.

Preston Feitz: I mean, they really are helping our customers make money, and they're desired by the drivers. So that's a that's a nice position to be in. I think Paccor's lean culture and operating disciplines are healthy and good for the company and good for our operating performance, good for our customers in terms of us being a lean operating company and good for our shareholders. So you're right in making the observation and we think that observation will hold true.

Speaker Change: A nice position to be in I think Packers lean culture and operating disciplines are.

I think PACCAR's lean culture and operating disciplines are healthy and good for the company, and good for our operating performance, good for our customers in terms of us being a lean operating company, and good for our shareholders. So you're right in making the observation, and we think that that observation will hold true.

Speaker Change: Healthy and good for the company and good for our operating performance good for our customers in terms of us being a lean operating company and good for our shareholders. So you're right in making the observation and we think that that objection will hold true.

Tami Zakaria: Okay. And lastly, some of your competitors are talking about some pretty small incremental cost increases on EPA 2027 versus what most of us expect. I'm wondering if you could just weigh in on your expectations, especially since you're already up and running in California. Can you talk about what you folks are seeing and expecting?

Jerry Revich: Okay. And lastly, some of your competitors are talking about some pretty small incremental cost increases on EPA 2027 versus what most of us expect. I'm wondering if you could just weigh in on your expectations, especially since you're already up and running in California. Can you talk about what you folks are seeing and expecting?

Jerry Revich: Super. And lastly, you know, some of your competitors are talking about some pretty small incremental cost increases on EPA 2027 versus what most of us expect.

Speaker Change: Okay.

Speaker Change: And lastly, some of your competitors are.

Speaker Change: Talking about some pretty small incremental cost increases on EPA 2027 versus what most of US expect I am wondering if you could just weigh in on your expectations, especially since you are already up and running.

Preston Feitz: I'm wondering if you just weigh in on your expectations, especially since you're already up and running in California. Can you talk about what you folks are seeing in a Yeah, sure. First of all, I see you even observed the fact that we have a certified engine in California as we're the first manufacturer to do that. So we're, we're well positioned for any of the regulatory conditions that we encounter. Our thoughts is it could be in the 10 to 15,000 range right now subject to change depends on what the regulatory agencies do, but that feels like the right framing point for the cost as we look at 2027.

Speaker Change: In California can you talk about.

What you folks are seeing and expecting.

Rob Wertheimer: Yeah. Sure. First of all, nice that you even observed the fact that we have a certified engine in California as we're the first manufacturer to do that. So we're well-positioned for any of the regulatory conditions that we encounter. Our thoughts is it could be in the $10,000 to 15,000 range right now, subject to change. Depends on what the regulatory agencies do, but that feels like the right framing point for the cost as we look at 2027.

Preston Feight: Yeah. Sure. First of all, nice that you even observed the fact that we have a certified engine in California as we're the first manufacturer to do that. So we're well-positioned for any of the regulatory conditions that we encounter. Our thoughts is it could be in the $10,000 to 15,000 range right now, subject to change. Depends on what the regulatory agencies do, but that feels like the right framing point for the cost as we look at 2027.

Speaker Change: Yeah sure first of all night.

Speaker Change: You even observe the fact that we are a certified engine in California. As we were the first manufacturer to do that so we're well positioned for any of the regulatory conditions that we encounter.

Speaker Change: Our thoughts as it could be in the 10% to 15000 range right now subject to change depends on what the regulatory agencies do but that feels like the right framing point for the cost. So as we look at 2027 and Jerry Bear in mind, it's not only about material costs. It's also the extended warranties that would kick in with EPA 27. This will have an effect and impact on the cost.

Jerry Revich: And Jerry, bear in mind, it's not only about material costs, it's also the extended warranties that kick in with EPA 27, that will have an effect, an impact on the cost levels as well. Absolutely. Thank you.

Harrie Schippers: Jerry, bear in mind, it's not only about material cost. It's also the extended warranties that kick in with EPA 2027 that will have an effect on the cost level as well.

Speaker Change: Levels as well.

Tami Zakaria: Absolutely. Thank you, everyone.

Jerry Revich: Absolutely. Thank you, everyone.

Speaker Change: Absolutely. Thank you everyone.

Speaker: You bet. Great questions.

Rob Wertheimer: You bet. Great questions.

Preston Feight: You bet. Great questions.

Speaker Change: You bet great questions.

Quinn Simon: Our next question comes from Quinn Simon with Raymond. Great, thank you.

Operator: Our next question comes from Ken Zhan, who's Raymond James. Ken, please go ahead.

Speaker Change: Our next question comes from.

Speaker Change: With Raymond James.

Speaker Change: Please go ahead.

Ken Hastings: Great. Thank you. First one, Preston, for you. I'm just curious in terms of the conversation that you and the team are having with your truckload customers as you think about kind of the order progression as we go in coming months. It seems, and I don't know if you'd agree with this, and obviously, you've lived through lots of these truck cycles over time. But just with respect to kind of this election uncertainty and the range of political and kind of regulatory outcomes that may come about, I'm just curious, do you think there's more, I mean, there's always this notion of there's kind of a wait-and-see around the election, but it does seem like, from our standpoint anyway, maybe this year is a little bit greater. So I'm curious if you share that thought.

Ken Zahn: Great. Thank you. First one, Preston, for you. I'm just curious in terms of the conversation that you and the team are having with your truckload customers as you think about kind of the order progression as we go in coming months. It seems, and I don't know if you'd agree with this, and obviously, you've lived through lots of these truck cycles over time.

Alright, thank you.

Quinn Simon: First one Preston for you maybe I'm just curious In terms of the conversations that you and the team are having with your truckload customers, and you think about kind of the order of progression as we go on in coming months, it seemed, and I don't know if you'd agree with this, and obviously you've lived through lots of these truck cycles over time, but just with respect to kind of this election uncertainty and, you know, the range of political and kind of regulatory outcomes that may come about, I'm just curious, do you think there's more, I mean, there's always this notion of there's a kind of a wait and see around the election, but it does seem like, from our standpoint anyway, maybe this year is a little bit greater.

Speaker Change: First one question for you maybe I'm just curious.

In terms of the conversations that you and the team are having with your truckload customers.

Speaker Change: When you think about kind of the ore.

Speaker Change: Order progression is Magellan in coming months. It is seen in I don't know if you'd agree with you.

Speaker Change: Two of these.

Speaker Change: Rock cycles over time.

But just with respect to kind of this election uncertainty and the range of political and kind of regulatory outcomes that may come about, I'm just curious, do you think there's more, I mean, there's always this notion of there's kind of a wait-and-see around the election, but it does seem like, from our standpoint anyway, maybe this year is a little bit greater. So I'm curious if you share that thought. If so, do you think it's fair that maybe there's a potential for more of a delayed order cadence as we look into 2025?

Speaker Change: With respect to kind of this election uncertainty and the range of political and regulatory outcome that that may come about I am just curious do you think theres more.

Speaker Change: The notion of there is a kind of a wait and see around the election, but it does seem like from our standpoint anyway, maybe this year you will get greater so.

Preston Feitz: So I'm curious, did you share that thought? And if so, would you think it's fair that maybe there's a potential for more of a delayed order cadence as we look into 2025? You know, I think that we have some really smart customers. And our observations in those conversations is they think very clearly about their economic conditions that they're operating in. And I think they know that there needs to be a steadiness to their buying cycle of trucks because it's good for their operating models. And so they've been Probably reluctant on the truckload side to be able to make the capital truck purchases they wanted for the last little while, just based upon rates.

Speaker Change: Terry can you share that thought and if so would you you didn't get fair that maybe there is there is a potential for more.

Ken Hastings: If so, do you think it's fair that maybe there's a potential for more of a delayed order cadence as we look into 2025?

Speaker Change: Delayed.

Speaker Change: Order cadence as we as we look into 'twenty five.

Rob Wertheimer: I think that we have some really smart customers, and our observations in those conversations is they think very clearly about their economic conditions that they're operating in. I think they know that there needs to be a steadiness to their buying cycle of trucks because it's good for their operating models. So they've been probably reluctant on the truckload side to be able to make the capital truck purchases they wanted for the last little while just based upon rates. I think they're kind of hopeful that that's going to change. I think far more important than anything like an election is when those rates change; then they will probably increase the cadence of their buys. I think that that's what they're thinking about.

Preston Feight: I think that we have some really smart customers, and our observations in those conversations is they think very clearly about their economic conditions that they're operating in. I think they know that there needs to be a steadiness to their buying cycle of trucks because it's good for their operating models. So they've been probably reluctant on the truckload side to be able to make the capital truck purchases they wanted for the last little while just based upon rates.

No I think that we have some really smart customers and our observations in those conversations as they think very clearly about their economic conditions that they're operating in.

Speaker Change: They know that there needs to be a steadiness to their buying cycle of trucks, because it's good for their operating models and.

Speaker Change: So they've been.

Speaker Change: Probably reluctant on the truckload side to be able to.

Speaker Change: Make the capital truck purchases they wanted for the last little while just based upon rates.

I think they're kind of hopeful that that's going to change. I think far more important than anything like an election is when those rates change; then they will probably increase the cadence of their buys. I think that that's what they're thinking about.

Preston Feitz: And I think they're kind of hopeful that that's going to change. And I think Far more important than anything, like an election is when those rates change, then they will probably increase the cadence of their buys. And I think that that's what they're thinking about. Yeah, okay.

Speaker Change: And I think they are kind of hopeful that thats going to change.

Speaker Change: <unk>.

Speaker Change: Far more important than anything like an election is when those rates change that they will probably increase the cadence of their buys and I think that that's what they're thinking about.

Ken Hastings: Got it. Okay. And then just with respect to the deliveries in North America, it seemed from some of the third-party data that maybe in Q3 you had a little bit heavier on or heavier on medium duty relative to heavy duty. Is there any normalization that may occur in Q4, or is it not enough to call out in terms of from a mix perspective as you think Q3 to Q4?

Ken Zahn: Got it. Okay. And then just with respect to the deliveries in North America, it seemed from some of the third-party data that maybe in Q3 you had a little bit heavier on or heavier on medium duty relative to heavy duty. Is there any normalization that may occur in Q4, or is it not enough to call out in terms of from a mix perspective as you think Q3 to Q4?

Harrie Schippers: And then just with respect to the deliveries in North America, it seems from from some of the third party data that that maybe the third quarter he had a little bit heavier on or heavier on medium duty relative to heavy duty. Is there a, is there any normalization that may occur in fourth quarter? Or is that, is it not enough to call out in terms of from a mixed perspective? Do you think three Q to four Q?

Speaker Change: Got it Okay, and then just with respect.

Speaker Change: Back to the deliveries in North America.

Speaker Change: From some of the third party data that maybe the third quarter you had.

Speaker Change: A little bit heavier on.

Speaker Change: Heavier in medium duty.

Relative to heavy duty is there a.

Speaker Change: Is there any normalization that may occur in the fourth quarter or is that is it not enough to call out in terms of from a mix perspective. Thank.

<unk>.

Harrie Schippers: Harry, you and I were talking about that, weren't you? Yeah, so medium-duty volumes were a little bit higher in the third quarter with some catch-up, mirror-related to some extent. So in the fourth quarter, we expect a more normal, medium-verse-heavy mix than like we used to see. got it. Okay. And I assume, Harry, that there's not the the implications from a profit perspective aren't what they would have been, you know, several years ago, just given the improvement, even medium duty side of that care. The margins on our medium duty products are well in line with the AVIs these days.

Rob Wertheimer: I'm sorry. I know you were talking—you and I were talking about that, weren't you?

Preston Feight: I'm sorry. I know you were talking—you and I were talking about that, weren't you?

Speaker Change: Harry I know you were talking.

Harrie Schippers: Yeah. Medium duty volumes were a little bit higher in Q3 with some catch-up more related to some extent. In Q4, we expect a more normal medium versus heavy mix than we used to see.

But that won't you.

Speaker Change: So medium duty volumes were a little bit higher in the third quarter with some catch up.

Speaker Change: Related to some extent.

Speaker Change: So in the fourth quarter, we expect a more normal medium versus heavy mix than like we used to see.

Ken Hastings: Got it. Okay. And I assume, Harry, that the implications from a profit perspective aren't what they would have been several years ago just given the improvement in medium duty side. Is that fair?

Ken Zahn: Got it. Okay. And I assume, Harry, that the implications from a profit perspective aren't what they would have been several years ago just given the improvement in medium duty side. Is that fair?

Got it okay.

Speaker Change: Assume Harry there is not.

Speaker Change: The implications from a profit perspective aren't what they would have been <unk>.

Speaker Change: Well years ago, just given the improvement in <unk>.

Speaker Change: Medium duty side is that fair.

Harrie Schippers: No, they're not. No, the margins on our medium duty products are well in line with the heavies these days.

Speaker Change: Oh.

Speaker Change: The margins on a medium duty product are well in line with the heavy these days thanks observation Tim.

Harrie Schippers: Nice observation, Tim. as a percentage. They're smaller trucks, but the percentage is very All right, thank you.

Stephen Volkmann: Nice observation, Tim.

Ken Zahn: Nice observation, Tim.

Harrie Schippers: Yeah. As a percentage. They're smaller trucks, but the percentage is very similar.

Speaker Change: As a percentage of smaller trucks, but the percentage is very similar.

Ken Hastings: Yeah. All right. Thank you.

Ken Zahn: Yeah. All right. Thank you.

Speaker Change: Alright, thank you.

Kyle Mendes: Our next question comes from Kyle Mendes.

Operator: Our next question comes from Carl Mendes with Sidney. Carl, please go ahead.

Speaker Change: Our next question comes from Carlo.

Kyle Mendes: Paul, please go ahead. Thank you. I was just curious, you know, on the on the R&D guide for next year, just how do we interpret the step up in R&D guidance for next year, especially given market, we could be in kind of a flat to slightly up market, global market for you guys next year. Well, if you think about where we're at this year, and if you took a midpoint at $460, and then you said if you took the midpoint on something like $500 or a little over $500, it's not that big of a change.

Speaker Change: Paul.

Speaker Change: Please go ahead.

Tami Zakaria: Thank you. I was just curious on the R&D guide for next year, just how do we interpret the step-up in R&D guidance for next year, especially given market we could be in kind of a flat to slightly up market, global market for you guys next year?

Kyle Menges: Thank you. I was just curious on the R&D guide for next year, just how do we interpret the step-up in R&D guidance for next year, especially given market we could be in kind of a flat to slightly up market, global market for you guys next year?

Speaker Change: Thank you I was just curious.

Carlo Paul: On the RMB guide for next year, just how do we interpret the step up in R&D guidance for next year, especially given market it could be in kind of a flat to slightly up market global market for you guys next year.

Rob Wertheimer: Well, if you think about where we're at this year and if you took a midpoint at 460, and then you said if you took the midpoint on something like 5 or a little over 500, it's not that big of a change. And the way we think about R&D is when we have important good projects to work on, be they powertrain or new truck systems or connectivity or electronics or all the things that will make our trucks more profitable for the customers, then we make those investments, and this is the right level of R&D investment for that.

Preston Feight: Well, if you think about where we're at this year and if you took a midpoint at 460, and then you said if you took the midpoint on something like 5 or a little over 500, it's not that big of a change. And the way we think about R&D is when we have important good projects to work on, be they powertrain or new truck systems or connectivity or electronics or all the things that will make our trucks more profitable for the customers, then we make those investments, and this is the right level of R&D investment for that.

Speaker Change: Well, if you think about where we're at this year and if you took a midpoint at $4 60 and that you said if you took the midpoint on something like 5% or a little over 500, it's not that big of a change in the way. We think about R&D is when we have important good projects to work on b, the powertrain or new trucks systems or connectivity or electronics or other things that will make our trucks more profitable for the customers.

Preston Feitz: And the way we think about R&D is when we have important good projects to work on, be they powertrain or new truck systems or connectivity or electronics or all the things that will make our trucks more profitable for the customers, then we make those investments. And this is the right level of R&D investment for that.

Speaker Change: And then we make those investments and this is the right level of R&D investment for that.

Preston Feitz: Got it.

Tami Zakaria: Got it. And then I know you've talked about a strong vocational market into next year, more related to Class 8, but just any thoughts on how we should be thinking about the medium-duty market next year in North America?

Kyle Menges: Got it. And then I know you've talked about a strong vocational market into next year, more related to Class 8, but just any thoughts on how we should be thinking about the medium-duty market next year in North America?

Preston Feitz: And then I know you've talked about a strong vocational market into next year, more related to Class A. But just any thoughts on how we should be thinking about the medium duty market next year in North America? I think we should see a healthy medium duty market again next year in North America as well. I think it's been good this year and there is, as you just kind of indicated, there's some portion of that which hits into the vocational market, but overall it should be a good market. remain a good market is probably the right way to say it, Kyle.

Speaker Change: Got it.

Speaker Change: And then I know you've talked about a strong vocational market into next year more related to class eight but just any thoughts on how we should be thinking about the medium duty market next year in North America.

Rob Wertheimer: I think we should see a healthy Medium Duty market again next year in North America as well. I think it's been good this year, and there is, as you just kind of indicated, there's some portion of that which hits into the Vocational market. But overall, it should be a good market, remain a good market. It's probably the right way to say it, Kyle.

Preston Feight: I think we should see a healthy Medium Duty market again next year in North America as well. I think it's been good this year, and there is, as you just kind of indicated, there's some portion of that which hits into the Vocational market. But overall, it should be a good market, remain a good market. It's probably the right way to say it, Kyle.

I think we should see a healthy medium duty market again next year in North America as well I think it's been good this year and there is as you just kind of indicated there is some portion of that which gets into the vocational market, but overall it should be a good market.

Speaker Change: Remain a good market is probably the right way to say Kyle.

Tami Zakaria: All right. Thank you.

Kyle Menges: All right. Thank you.

Kyle Mendes: Alright, thank you.

Alright, thank you.

Chad Dillard: You bet. The next question comes from Chad Dillard with Bone. Chad, please go ahead. Hi, good morning, guys. So I just have a question for you on, hey, how are you?

Rob Wertheimer: You bet.

Preston Feight: You bet.

Speaker Change: You bet.

Speaker Change: Okay.

Operator: The next question comes from Chad Dillard with Bernstein. Chad, please go ahead.

Your next question comes from Chad Dillard with Bernstein.

Speaker Change: Please go ahead.

Chad Dillard: Hi. Good morning, guys. So just another question for you on—hey, how are you? So just a question for you on what you're embedding for your 2025 North America truck guide. Just trying to think through the split between vocational versus tractor. I think you mentioned truck was about 50% of 2024. Is that the same or a little bit higher? Any pre-buy embedded? And then I think you mentioned that the progression of price cost will go into reverse in 2025. So is it fair to say that Q4 is probably the trough for TP and over margins?

Hi, good morning, guys.

Speaker Change: So it's not a question for you on Hey, how are you.

Chad Dillard: So just a question for you on what you're embedding for your 25 North America truck guide, just trying to think through the split between vocational versus tractor, I think you mentioned your truck was about 50%, 24, the same or higher in pre-buy embedded. And then I think you mentioned that the progression of price costs will go into reverse in 25. So is it fair to say that the fourth quarter is probably the trial for TPN You know, I think what we'll expect to see is that the vocational market remains strong, but there's probably a pickup in the truckload sector.

Speaker Change: Just a question for you on what Youre embedding.

For your 25, North America truck guide I'm, just trying to think through that split between vocational versus tractor I think you mentioned.

Speaker Change: Yeah, Chuck was about 50% to 20 for the same or higher.

Speaker Change: Pre buy embedded and then I think you mentioned that the progression of price cost.

Speaker Change: We will go into reverse in 'twenty five so is it fair to say that the.

Speaker Change: Fourth quarter is probably the trough for keeping our gross margins.

Rob Wertheimer: I think what we'll expect to see is that the vocational market remains strong, but there's probably a pickup in the truckload sector. So the ratio of tractor to truck might move around a little bit towards heavier tractor as we go through the year next year. See how that starts and when that takes effect, as you mentioned. But I think that what we're seeing now, as we said, as we started this year in a really strong position, we're finishing at a point where the truckload carriers are still feeling tension. And then as we get into next year into 2025, they're going to want to continue to buy trucks, keep their fleets at the right ages. And so we'll see some increase in the truckload purchases throughout the year. Timing for that, we'll see.

Preston Feight: I think what we'll expect to see is that the vocational market remains strong, but there's probably a pickup in the truckload sector. So the ratio of tractor to truck might move around a little bit towards heavier tractor as we go through the year next year. See how that starts and when that takes effect, as you mentioned. But I think that what we're seeing now, as we said, as we started this year in a really strong position, we're finishing at a point where the truckload carriers are still feeling tension.

Speaker Change: I think what we will expect to see as the vocational market remained strong, but theres, probably a pickup in the truckload sector. So the ratio of tractor truck might move around a little bit towards heavier tractor as we go through the year next year.

Preston Feitz: So the ratio of tractor to truck might move around a little bit towards heavier tractor as we go through the year next year. See how that starts and when that takes effect, as you mentioned. But I think that what we're seeing now, as we said, as we started this year in a really strong position, we're finishing at a point where the truckload carriers are still feeling tension. And as we get into next year, into 2025, they're going to want to continue to buy trucks, keep their fleets at the right ages. And so we'll see some increase in the truckload purchases throughout the year.

Speaker Change: See how that starts and when that takes effect as you mentioned.

Speaker Change: But I think that.

Speaker Change: What we're seeing now as we said as we started this year and a really strong position, we're finishing at a point where the truckload carriers are still feeling tension and then as we get into next year into 2025, they're going to want to continue to buy trucks keep their fleets at the right agents and so we will see some increase in the truckload purchases throughout the year timing for that we will see.

And then as we get into next year into 2025, they're going to want to continue to buy trucks, keep their fleets at the right ages. And so we'll see some increase in the truckload purchases throughout the year. Timing for that, we'll see.

Preston Feitz: Timing for that, we'll see. Okay, okay.

Ken Hastings: Got it. Okay. And then a second question for you on the Finco business. Just how should we think about that going into the end of the year and into 2025? And more specifically, just looking at the interest and other borrowing expenses, it seems like there's a pretty big step up, and just trying to think through how that evolves.

Chad Dillard: Got it. Okay. And then a second question for you on the Finco business. Just how should we think about that going into the end of the year and into 2025? And more specifically, just looking at the interest and other borrowing expenses, it seems like there's a pretty big step up, and just trying to think through how that evolves.

Bryce Poplosky: And then a second question for you on the FANCO business. Just how should we think about that going into the end of the year and in 2025? And more specifically, you're just looking at like the interest and other borrowing expenses seem like there's a pretty big step up and just trying to think through how that evolves. The finance company continues to show strong performance. We have a very healthy portfolio of mainly A&B customers. Past use remained low. seeming a little credit loss but that's normal at this point in the cycle. As we get into next year we will continue to see strong performance of the finance company Interest rates, we are time hedged there.

Speaker Change: Got it okay.

Speaker Change #100: A second question for you on the Peco business, just how should we think about that going into the end of the year, and then 25 and more specifically.

Speaker Change #101: Yes, just looking at like the interest and other borrowing expenses. It seems like there's a pretty big step up and.

How that evolves.

Harrie Schippers: The finance company continues to show strong performance. We have a very healthy portfolio of mainly A and B customers. Delinquencies remain low. We've seen a little credit losses, but that's normal at this point in the cycle. So as we get into next year, we will continue to see strong performance of the finance company. Interest rates, we are time-hedged there. So we issue medium-term notes in line with the leases and the financing contracts that we offer. So we don't have a lot of exposure there.

Speaker Change #101: The Finance company continues to show strong performance.

Speaker Change #101: We have a very healthy portfolio of mainly E&P customers.

Speaker Change #101: <unk> remained low.

Speaker Change #101: <unk> seen a little credit losses, but that's normal at this point in the cycle.

Speaker Change #101: We get into next year, we will we will continue to see strong performance of the finance company.

Speaker Change #101: Interest rates.

Bryce Poplosky: So we we issue medium term notes in line with the leases that and the financing contracts that we offer. So we don't have a lot of exposure there. In the portfolio, this is Bryce, I'd just like to add that our portfolio is growing very nicely because we have a market right now where the banks are getting out at times and we're seeing a little bit less competition. Our market share is up actually nicely here in the quarter and we expect strong continued performance in our business here. Great, thank you.

Our time hedged so we issue medium term notes in line with the leases and the financing contracts that would be helpful. So we don't have a lot of exposure there.

Stephen Volkmann: The portfolio, this is Bryce. I'd just like to add that our portfolio is growing very nicely because we have a market right now where the banks are getting out at times. We're seeing a little bit less competition. Our market share is up actually nicely here in the quarter, and we expect strong continued performance in our business here.

Speaker Change #102: And then in the portfolio. This is Brian I'd, just like to add that our portfolio is growing very nicely because we have.

Brice Poplawski: The portfolio, this is Bryce. I'd just like to add that our portfolio is growing very nicely because we have a market right now where the banks are getting out at times. We're seeing a little bit less competition. Our market share is up actually nicely here in the quarter, and we expect strong continued performance in our business here.

Speaker Change #101: Right now where the banks are getting.

Getting out at times, we're seeing a little bit less competition or market share is up actually nicely here in the quarter and we expect strong continued performance in our business here.

Ken Hastings: Great. Thank you.

Chad Dillard: Great. Thank you.

Speaker Change #101: Great. Thank you.

Jeff Kauffman: The next question comes from Jeff Kauffman with Radcliffe Research. Please go ahead, Jeff. Thank you. Thank you very much. Hey, everybody. I want to talk a little bit about Thank you. Thank you and congratulations.

Operator: The next question comes from Jeff Kauffman with Vertical Research Partners. Please go ahead, Jeff.

Speaker Change #103: Your next question comes from Jeff Kauffman with Backfill research partners.

Speaker Change #103: Please go ahead, Jeff Thank you Barry.

Rob Wertheimer: Thank you very much.

Thank you very much everybody.

Tami Zakaria: Thank you very much. Hey, everybody.

Jeff Kauffman: Thank you very much. Hey, everybody.

Rob Wertheimer: Hey, Jeff.

Preston Feight: Hey, Jeff.

Tami Zakaria: I want to talk a little bit about, thank you. Thank you. And congratulations. I want to talk a little bit about as the South American growth is going to be exceeding that in the near term for North America and Europe. Does this at all change the specs on the trucks in terms of what you're seeing and how that might affect ASP?

Jeff Kauffman: I want to talk a little bit about, thank you. Thank you. And congratulations. I want to talk a little bit about as the South American growth is going to be exceeding that in the near term for North America and Europe. Does this at all change the specs on the trucks in terms of what you're seeing and how that might affect ASP?

Speaker Change #104: Hey, Jeff talk a little bit about thank you. Thank you and congratulations.

Preston Feitz: I want to talk a little bit about the South American growth is going to be exceeding that in the near term for North American Europe. Does it all change the specs on the trucks in terms of what you're seeing and how that might affect ASP? You know, if you think about the truck specific to Brazil, which is the largest market in South America we're participating in, is that it really is the DOF truck that we're using there. So that truck is kind of effectively the same truck as we get in Europe. And we have had to put together certain specs for them where they're operating in different operating conditions, more six by fours, more sugarcane kind of applications, lumber hauling applications.

Speaker Change #104: I wanted to talk a little bit about it.

Speaker Change #104: The South American growth is going to be exceeding that.

Speaker Change #104: In the near term for North America and Europe.

Speaker Change #104: At all change the spa.

Speaker Change #104: Next on the trucks in terms of what Youre seeing and how that might affect.

Speaker Change #104: Pete.

Yeah.

Rob Wertheimer: If you think about the truck specific to Brazil, which is the largest market in South America we're participating in, it really is the DAF truck that we're using there. So that truck is kind of effectively the same truck as we get in Europe. And we have had to put together certain specs for them where they're operating in different operating conditions, more 6x4s, more sugarcane kind of applications, lumber hauling applications. So it's a bit heavier duty. So maybe the selling price is a slight bit higher there. But in general, I tend to think about them like a European truck.

Preston Feight: If you think about the truck specific to Brazil, which is the largest market in South America we're participating in, it really is the DAF truck that we're using there. So that truck is kind of effectively the same truck as we get in Europe. And we have had to put together certain specs for them where they're operating in different operating conditions, more 6x4s, more sugarcane kind of applications, lumber hauling applications. So it's a bit heavier duty. So maybe the selling price is a slight bit higher there. But in general, I tend to think about them like a European truck.

Speaker Change #106: If you think about the truck specific to Brazil, which is the largest market in South America. We're participating in is it really is the <unk> truck that we're using there. So that truck is kind of effectively the same truck as we get in Europe.

Speaker Change #106: And we have had to put together certain specs for them, where they're operating in different operating conditions more six by fours more sugarcane cut applications lumber hauling applications. So there's a bit of heavy heavier duty. So maybe the selling prices a slight bit higher there, but in general I tend to think about it like a European truck.

Preston Feitz: So there's a bit of heavy, heavier duty. So maybe the selling price is a slight bit higher there. But in general, I tend to think about them like a European truck.

Preston Feitz: Okay, and then as we transition in 2025, at some point to a market where maybe truckload LTL is growing a little faster than vocational and international. How might that be affecting ASP as we work our way through 2020? And I wouldn't, I wouldn't put too much energy into trying to figure out the nuance to that if it was me. I think that you could obviously think that a high content vocational truck is more expensive than a maybe a standard six by four tractor, but I wouldn't, I wouldn't probably try to parse that together. There's probably a higher variety and a bigger range in prices for vocational trips than you would see for on-highway.

Tami Zakaria: Okay. And then as we transition in 2025 at some point to a market where maybe truckload LTL is growing a little faster than vocational and international, how might that be affecting ASP as we work our way through 2025?

Jeff Kauffman: Okay. And then as we transition in 2025 at some point to a market where maybe truckload LTL is growing a little faster than vocational and international, how might that be affecting ASP as we work our way through 2025?

Speaker Change #106: Okay, and then as we transition in 2025.

Speaker Change #106: At some point to a market where may be truckload LPL is growing a little faster than vocational and international.

Speaker Change #107: How might that be affecting ISP as we work our way through 'twenty five.

Rob Wertheimer: I wouldn't put too much energy into trying to figure out the nuance to that. If it was me, I think that you could obviously think that a high-content vocational truck is more expensive than maybe a standard 6x4 tractor, but I wouldn't probably try to parse that together.

Preston Feight: I wouldn't put too much energy into trying to figure out the nuance to that. If it was me, I think that you could obviously think that a high-content vocational truck is more expensive than maybe a standard 6x4 tractor, but I wouldn't probably try to parse that together.

Speaker Change #107: And I wouldn't I wouldn't put too much energy into trying to figure out the nuance to that if it was me I think that you could obviously think high content vocational truck is more expensive than a standard six by four tractor, but I wouldn't I wouldn't probably try to parse that together.

Speaker Change #107: Yeah.

Harrie Schippers: There's probably a higher variety and a bigger range in prices for vocational trucks than you would see for on-highway.

Speaker Change #107: That's probably right.

Speaker Change #107: Brian again, a bigger advantage in prices for vocational trucks than you would see for on island and then if you keep the vocational segment and you start thinking about the medium duty participation in that I think you'd have a hard thing to kind of suss out there.

Jeff Kauffman: Yeah, and then if you keep the vocational segment and you start thinking about the medium-duty participation in that, I think you'd have a hard thing that kind of sucks out there. Well, fair enough. I was just looking for some context and that's fine. So that's my one question. Thanks Jeff, good to talk to you.

Rob Wertheimer: Yeah. And then if you keep the vocational segment and you start thinking about the medium duty participation in that, I think you'd have a hard thing to kind of suss out there.

Preston Feight: Yeah. And then if you keep the vocational segment and you start thinking about the medium duty participation in that, I think you'd have a hard thing to kind of suss out there.

Tami Zakaria: Well, fair enough. I was just looking for some context, and that's fine. So that's my one question.

Jeff Kauffman: Well, fair enough. I was just looking for some context, and that's fine. So that's my one question.

Speaker Change #108: No fair enough I was just looking for some context.

Speaker Change #107: So that's my one question question.

Rob Wertheimer: Great question. Thanks, Jeff. Good to talk to you.

Preston Feight: Great question. Thanks, Jeff. Good to talk to you.

Thanks, Jeff good to talk to you.

Michael Fletcher: Our next question comes from Michael Fletcher with Bank of America. Please go ahead. Great. Yeah. Thank you, gentlemen, for taking my questions. Just, you guys have really been investing in the business, in your trucks, in your facilities. I'm just curious, how much more capacity can you bring on to serve the US market? Is it, you know, 10 to 15%? Is it 20% more than what you guys could do previously? And is this higher capacity? Is this available in 2025, in the second half, if we see that ramp?

Operator: Our next question comes from Michael Feniger with Bank of America. Please go ahead, Michael.

Our next question comes from Robert <unk> with Bank of America.

Speaker Change #109: Please go ahead Michael.

Ken Hastings: Great. Yeah. Thank you, gentlemen, for taking my questions. Just you guys have really been investing in the business, in your trucks, in your facilities. I'm just curious, how much more capacity can you bring on to serve the US market? Is it 10% to 15%? Is it 20% more than what you guys could do previously? And is this higher capacity, is this available in H2 2025 if we see that ramp, or is this more of a 2026 that you guys can raise capacity in some of these facilities?

Michael Feniger: Great. Yeah. Thank you, gentlemen, for taking my questions. Just you guys have really been investing in the business, in your trucks, in your facilities. I'm just curious, how much more capacity can you bring on to serve the US market? Is it 10% to 15%? Is it 20% more than what you guys could do previously? And is this higher capacity, is this available in H2 2025 if we see that ramp, or is this more of a 2026 that you guys can raise capacity in some of these facilities?

Speaker Change #110: Great. Yes. Thank you gentlemen for taking my questions. Just you guys have really been investing in the business.

Speaker Change #109: In your trucks in your facilities I'm, just curious how much more capacity can you bring on to serve.

Speaker Change #110: The U S market is it 10% to 15%, 20% more than what you guys can do previously and it has higher capacity.

Speaker Change #110: Available in 2025 in the second half when we see that ramp or is this more of a 2026 that you guys can raise capacity in some of these facilities.

Preston Feitz: Or is this more of a 2026 that you guys can raise capacity in some of these facilities?

Preston Feitz: Hey, Mike, thanks for the comments. They're nice to hear. The thing we're doing with our capital expenditures, as we noted, is we are making investments in the factories. And that's not a new thing, right? We've been doing that over the past few years in anticipation of where the markets will be in our growth. So some of those capacity investments are in incomplete, others are underway. So we have we have all the capacity we need for the markets in the coming years, we will not be capacity constrained, and we do anticipate growth. So that feels really positive.

Rob Wertheimer: Hey, Mike, thanks for the comments. They're nice to hear. The thing we're doing with our capital expenditures, as we noted, is we are making investments in the factories, and that's not a new thing, right? We've been doing that over the past few years in anticipation of where the markets will be in our growth. So some of those capacity investments are in and complete. Others are underway. So we have all the capacity we need for the markets in the coming years. We will not be capacity constrained, and we do anticipate growth. So that feels really positive.

Preston Feight: Hey, Mike, thanks for the comments. They're nice to hear. The thing we're doing with our capital expenditures, as we noted, is we are making investments in the factories, and that's not a new thing, right? We've been doing that over the past few years in anticipation of where the markets will be in our growth. So some of those capacity investments are in and complete. Others are underway. So we have all the capacity we need for the markets in the coming years. We will not be capacity constrained, and we do anticipate growth. So that feels really positive.

Speaker Change #111: Hey, Mike Thanks for the comments there nice to hear.

The thing we are doing with our capital expenditures as we noted is we are making investments in the factories and thats not a new thing we've been doing that over the past few years in anticipation of where the markets will be in our growth.

Speaker Change #111: Some of those capacity investments are in and complete others are underway. So we have we have all the capacity we need for the markets in the coming years, we will not be capacity constrained and we do anticipate growth so that feels really positive.

Preston Feitz: Okay. Helpful.

Stephen Volkmann: Okay. Helpful. And then just, I guess, the last question. You guys talked a little bit about a normalization of the used market in North America, a little weaker in Europe. So I hope you can kind of flesh that out. And I'm curious if the spread between the new price for a truck, let's say in 2025, versus what you're seeing for a used truck right now, is that spread kind of normal? Is it wider than usual? Just curious if you guys are seeing anything there in the market. Thank you.

Michael Feniger: Okay. Helpful. And then just, I guess, the last question. You guys talked a little bit about a normalization of the used market in North America, a little weaker in Europe. So I hope you can kind of flesh that out. And I'm curious if the spread between the new price for a truck, let's say in 2025, versus what you're seeing for a used truck right now, is that spread kind of normal? Is it wider than usual? Just curious if you guys are seeing anything there in the market. Thank you.

Preston Feitz: And then just, I guess the last question, you guys talked a little bit about a normalization of the used market in North America, a little weaker in Europe. I was hoping you kind of flesh that out. And I'm curious if the spread between the new price for a truck, let's say in 2025 versus what you're seeing for a used truck right now, is that spread kind of normal? Is it wider than usual? Just curious if you guys are seeing anything there in the market. Thank you. As the used truck market normalizes, also that spread becomes more normal.

Speaker Change #112: Okay helpful. And then just I guess the last question you guys talked a little bit about <unk>.

Speaker Change #113: Normalization in the used market in North America, a little weaker in Europe, I was hoping you can kind of flesh that out and I'm curious if the spread between the new price for a truck.

Speaker Change #113: In 2025 versus <unk>.

Speaker Change #113: What youre seeing for used truck right now is that spread kind of normal is it wider than usual just curious if you guys are seeing anything there in the market. Thank you.

Harrie Schippers: As the used truck market normalizes, also that spread becomes more normal.

Speaker Change #113: The used truck market normalizes also that spread becomes more normal.

Speaker Change #113: <unk>.

Rob Wertheimer: If I was to think about it, I would think that what we've seen is, as we said, is used truck prices have found their space right now. I think the trucks in the used market will look pretty good to us in 2025. Like we said, we also expect the new trucks to improve in 2025 in terms of market outlook. It feels like they're staying together, right? There's not a big separation between new and used.

Preston Feight: If I was to think about it, I would think that what we've seen is, as we said, is used truck prices have found their space right now. I think the trucks in the used market will look pretty good to us in 2025. Like we said, we also expect the new trucks to improve in 2025 in terms of market outlook. It feels like they're staying together, right? There's not a big separation between new and used.

Preston Feitz: If I was to think about it, I would think that what we've seen is, as we said, is used truck prices have found their space right now. And I think the trucks in the used market will look pretty good to us in 2025. And like we said, we also expect the new trucks to improve in 2025 in terms of market outlook. So it feels like they're staying together, right? There's not a big separation between new and used. Just looking at our inventory position in North America, that used truck inventory is at very, very healthy levels for us.

Speaker Change #113: If I was to think about it I would think that what we've seen is as we said as used truck prices have found their space right now and.

Speaker Change #113: I think the trucks and the used market will look pretty good to us in 2025.

Speaker Change #113: And like we said, we also expect the new trucks to improve in 2025 in terms of market outlook. So it feels like they're staying together right. There is not a big separation between new and used.

Harrie Schippers: Just looking at our inventory position in North America, that used truck inventory is at very, very healthy levels for us. That gives us confidence that we'll be able to operate at good levels there.

Just looking at our inventory position in North America.

Speaker Change #113: The used truck inventory is at very very healthy levels for us.

Preston Feitz: So that gives us confidence that we'll be able to operate at good levels there. That was helpful. Thanks.

Speaker Change #113: It gives us confidence that we'll be able to operate at good levels there.

Ken Hastings: That was helpful. Thanks, gentlemen. Just the last one to squeeze in. Just on parts, I'm curious if there's anything you guys would call out that's weighed on the margin for parts that might normalize or go away next year. If next year parts are up 5%, do you think the profit for parts can grow more than 5%? Just kind of curious on the puts and takes of what you guys have been seeing this year and how we think about that for 2025. Thank you.

Michael Feniger: That was helpful. Thanks, gentlemen. Just the last one to squeeze in. Just on parts, I'm curious if there's anything you guys would call out that's weighed on the margin for parts that might normalize or go away next year. If next year parts are up 5%, do you think the profit for parts can grow more than 5%? Just kind of curious on the puts and takes of what you guys have been seeing this year and how we think about that for 2025. Thank you.

Speaker: Thanks, gentlemen.

Speaker Change #114: That is helpful. Thanks, Thanks, gentlemen, just the last one to squeeze in just on parts I'm curious if there's anything you guys would call out.

Preston Feitz: Just the last one to squeeze in just on parts. I'm curious if there's anything you guys would call out that's weighed on the margin for parts that might normalize or go away next year. If next year parts are up 5%, do you think the profit for parts can grow more than 5%? Just kind of curious on the puts and takes of what you guys have been seeing this year and how we think about that for 2025. Thank you. Yeah, it's a good question. Fun to think about. I think as we noted in our comments, right, there is a smaller overall after sales market in 2024.

Speaker Change #115: Thats weighed on the margin for parts that might normalize or go away next year. If next year parts are up 5% do you think the prophet profit for parts can grow more than 5% just kind of curious on the puts and takes of what you guys have been seeing the last this year and how we think about that for 'twenty five.

Speaker Change #115: Thank you.

Rob Wertheimer: Yeah. That's a good question. Fun to think about. I think as we noted in our comments, right, there is a smaller overall after-sales market in 2024. So purely the number of parts overall has gone down that are being sold, but the parts team has grown the business even in that environment. So I think as the overall after-sales market picks up with increased freight activity, that will be good for the business and should be a tailwind for us.

Preston Feight: Yeah. That's a good question. Fun to think about. I think as we noted in our comments, right, there is a smaller overall after-sales market in 2024. So purely the number of parts overall has gone down that are being sold, but the parts team has grown the business even in that environment. So I think as the overall after-sales market picks up with increased freight activity, that will be good for the business and should be a tailwind for us.

Unknown Executive: Yeah, it's a good question, fun to think about it. As we noted in our comments, there is a smaller overall after sales market in 2024, so purely the number of parts overall has gone down that are being sold. But the parts team has grown the business even in that environment, so I think as the overall after sales market picks up with increased freight activity, that would be good for the business and should be a tailwind for us.

Speaker Change #115: Yes.

Speaker Change #117: It's a good question for them to think about I think as we noted in our comments right. There is a smaller overall after sales market in 2024, so purely the number of parts overall has gone down that are being sold but the parts team has grown the business even in that environment. So I think as the overall after sales market picks up with increased freight activity that will be good for the business and.

Harrie Schippers: So purely the number of parts overall has gone down that are being sold, but the parts team has grown the business even in that environment. So I think as the overall after sales market picks up with increased freight activity, that will be good for the business and should be a tailwind for us.

Speaker Change #117: Should be a tailwind for us.

Scott Groot: Emily? Our next question comes from Scott Groot with Walsley Tech. Scott, please go ahead. Hey, thanks, guys. I just want to follow up on the some of the gross margin commentary. So you had a comment that first half would be pressured and then improve in the second half next year. I'm wondering, was that a year over year or a sequential comment? Meaning, do we see further sequential gross margin pressure in the first half from from where we are now? Or was that purely a year over year. Yeah, Scott, you might have heard more than we said even there.

Emily: Emily?

Harrie Schippers: Emily.

Preston Feight: Emily.

Speaker Change #117: Emily.

Unknown Attendee: I'm a question, because you've got great support. Please, but Scott, please have a hug.

Operator: Our next question comes from Scott Group with Wolfe Research. Scott, please go ahead.

Speaker Change #118: Our next question comes from Scott Group with Wolfe Research.

Speaker Change #119: Please go ahead.

Tami Zakaria: Hey, thanks, guys. I just want to follow up on some of the gross margin commentary. So you had a comment that first half would be pressured and then improve in the second half next year. I'm wondering, was that a year-over-year or a sequential comment? Meaning, do we see further sequential gross margin pressure in the first half from where we are now, or was that just purely a year-over-year comment?

Scott Group: Hey, thanks, guys. I just want to follow up on some of the gross margin commentary. So you had a comment that first half would be pressured and then improve in the second half next year. I'm wondering, was that a year-over-year or a sequential comment? Meaning, do we see further sequential gross margin pressure in the first half from where we are now, or was that just purely a year-over-year comment?

Scott Group: Hey, thanks guys. I just want to follow up on the, some of the gross margin commentary. So you got to comment that first half would be pressured and then improve in the second half next year. I'm wondering, was that a year-over-year or a sequential comment, meaning do we see further sequential gross margin pressure in the first half from where we are now, or was that just surely a year-over-year coming?

Scott Group: Hey, Thanks, guys I just wanted to follow up on the some of the gross margin commentary. So you had a comment that first half would be pressured and then improve in the second half next year I'm wondering was that a year over year or a sequential comment meaning do we see further sequential gross.

Margin pressure in the first half from from where we are now or is that just purely a year over year comp.

Rob Wertheimer: Yeah, Scott, you might have heard more than we said even there. I think what we actually said was we feel like we will see improvement through the course of 2025. I can't be so specific as to know how that's going to play off, but it does feel like it'll be a mirror image of this year. So the strength we saw in the first half in 2024 will be, and then the normalization in the third, fourth quarter here likely will be inverted as we get into 2025. But the specifics of that, they're hard to detail out.

Preston Feight: Yeah, Scott, you might have heard more than we said even there. I think what we actually said was we feel like we will see improvement through the course of 2025. I can't be so specific as to know how that's going to play off, but it does feel like it'll be a mirror image of this year. So the strength we saw in the first half in 2024 will be, and then the normalization in the third, fourth quarter here likely will be inverted as we get into 2025. But the specifics of that, they're hard to detail out.

Unknown Executive: Yeah, Scott, you might have heard more than we said. Even there, I think what we actually said was we feel like we will see improvement through the course of 2025. I can't be so specific to know how that's going to play off, but it does feel like it will be a mirror image of this year. So the strength we saw in the first half in 2024 will be, and then the normalization in the third fourth quarter here, likely will be inverted as we get into 2025. But the specifics of that, they're hard to, they're hard to detail out.

Speaker Change #121: Yes, Scott you might have heard more than we said even there I think what we actually said was we feel like.

Preston Feitz: I think what we actually said was we feel like we will see improvement through the course of 2025. I can't be so specific to know how that's going to play off. But it does feel like it'll be a mirror image of this year. So the strength we saw in the first half in 24 will be and then the normalization in the third, fourth quarter here, likely will be inverted as we get into 2025. But the specifics of that, they're hard to they're hard to detail out.

Speaker Change #122: We will see improvement through the course of 2025 I can't be so specifics to know how that's going to play off but it does feel like it will be a mirror image of this year. So the strength we saw in the first half in 'twenty four we will be and then the normalization in the third and fourth quarter here likely will be inverted as we get into 2025, but the specifics of that.

Speaker Change #121: They're hard to detail out.

Tami Zakaria: Yeah. I mean, ultimately, I'm trying to figure out if you think that this Q4 is the bottom for gross margin.

Scott Group: Yeah. I mean, ultimately, I'm trying to figure out if you think that this Q4 is the bottom for gross margin.

Preston Feitz: Yeah, I mean, ultimately, I'm trying to figure out if you're Do you think that this Q4 is the bottom for gross margin? Yeah, I think I understand that. And I think I think your, your intuitions aren't far off.

Scott Group: Yeah, I mean, ultimately I'm trying to figure out if you think that this Q4 is the bottom for gross margin. Yeah, I think I understand that, and I think your intuitions aren't far off.

Speaker Change #123: Yes, I mean, ultimately I'm trying to figure out if your if.

Speaker Change #124: If you think that this Q4 is the bottom for gross margin.

Rob Wertheimer: Yeah. I think I understand that. I think your intuitions aren't far off.

Preston Feight: Yeah. I think I understand that. I think your intuitions aren't far off.

Speaker Change #125: Yes, I think I understand that.

Speaker Change #125: And I think I think you're you're.

Speaker Change #125: Intuitions arent far off.

Tami Zakaria: Okay. Okay. And then just lastly, any thoughts on how you're sort of thinking about approaching the market next year in terms of market share growth or a little bit more focused on price? How are you balancing that for next year?

Scott Group: Okay. Okay. And then just lastly, any thoughts on how you're sort of thinking about approaching the market next year in terms of market share growth or a little bit more focused on price? How are you balancing that for next year?

Speaker Change #125: Okay, Okay, and then just lastly.

Unknown Executive: And then just lastly, any thoughts on how you're sort of thinking about approaching the market next year? Is it in terms of market share, growth, or a little bit more focused on price? Hi, balancing that for next year.

Preston Feitz: And then just lastly, any thoughts on how you're sort of thinking about approaching the market next year is in terms of market share growth or a little bit more focused on price? How are you balancing that? Well, we like to see market share growth and we like to see ourselves perform well as a company for our shareholders. We'll be pursuing both of those next year. Thank you guys. Thank you.

Speaker Change #125: Any thoughts on how you are sort of thinking about approaching the market next year is it in terms of.

Speaker Change #125: Market share growth or little bit more focused on price, how you're balancing that for next year.

Rob Wertheimer: Well, we like to see market share growth, and we like to see ourselves perform well as a company for our shareholders. So we'll be pursuing both of those next year.

Preston Feight: Well, we like to see market share growth, and we like to see ourselves perform well as a company for our shareholders. So we'll be pursuing both of those next year.

Unknown Executive: Well, we like to see market share growth, and we like to see ourselves perform well as a company for our shareholders, so we are pursuing both of those next year.

Speaker Change #126: We like to see market share growth and we'd like to see ourselves performed well as the company for our shareholders will be pursuing both of those next year.

Unknown Executive: Okay, okay, thank you guys. You bet.

Tami Zakaria: Okay. Okay. Thank you, guys.

Scott Group: Okay. Okay. Thank you, guys.

Speaker Change #125: Okay.

Speaker Change #126: Thank you guys.

Rob Wertheimer: You bet.

Preston Feight: You bet.

Speaker Change #126: You bet.

Unknown Executive: Thank you. So I know a lot of questions in the queue at this time, are there any additional remarks from the companies? I'd like to thank everyone for joining the call, and thank you, Emily. Thanks to everyone for joining us today.

Operator: Thank you. There are no other questions in the queue at this time. Are there any additional remarks from the company?

Speaker: There are no other questions in the queue at this time.

Speaker Change #126: Thank you and with no other questions at this.

Ken Hastings: Are there any additional remarks from the I'd like to thank everyone for joining the call and thank you, Emily. Thank you everyone for joining us today.

Speaker Change #126: Are there any additional remarks on the call.

Harrie Schippers: I'd like to thank everyone for joining the call, and thank you, Emily.

Preston Feight: I'd like to thank everyone for joining the call, and thank you, Emily.

Speaker Change #126: I'd like to thank everyone for joining the call and thank you Emily.

Operator: Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect.

Speaker Change #126: Thank you everyone for joining us today.

Speaker: This concludes our call and you may now

Unknown Executive: This concludes our call, and we'll be now.

Concludes alcohol and you may now disconnect.

Q3 2024 PACCAR Inc Earnings Call

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